The Secret Strategies of Billion-Dollar Portfolios | Wendy Li

Wendy Li (0:00)

You're not necessarily going to know who you are as an investor, or what type of risk makes sense for you until you actually start to do it. And one of the consequences of that is, you're going to make a mistake, and those mistakes are going to be the best lessons that you learn along the way.

Tyler Gardner (0:19)

Hello, friends. This is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. When I think about the kind of guest I want to bring on to this show, someone who has truly lived inside the world of long-term investing at the highest levels, Wendy Li, was an obvious choice. She is not just a brilliant investor, she is someone who deeply understands how the ultra-wealthy and ultra-long-term institutions think about money, how they build, protect, and grow wealth over decades, not just quarters. Wendy is the Chief Investment Officer of Ivy Invest. Before founding Ivy, she spent her career managing billions of dollars for some of New York's most prominent endowments and foundations. Most recently, she served as Managing Director of Investments at the $4 billion Mother Cabrini Health Foundation, overseeing strategy, sourcing investments across asset classes, and leading daily portfolio management. Before that, she held senior investment roles at the UJA-Federation of New York, and began her career in the investment office at the Metropolitan Museum of Art. She's a graduate of Columbia University, a CFA charter holder, and above all, someone who brings a rare combination of expertise, clarity, and humility to a world that can often seem intimidating or even opaque from the outside. I'm thrilled to have her here to help pull back the curtain and share what she knows about building wealth with true intention. And I am excited to share with you an insightful and thought-provoking conversation with Wendy Li. So I do want to start in one of our previous conversations, because you had mentioned that one of your goals at this point in your career was to help people invest like the ultra-rich, and I loved that line. Could you elaborate on what you mean by that? What do the ultra-rich think about their investments that maybe the rest of us miss?

Wendy Li (2:41)

I think there's a couple facets to that, and I'll refer specifically to the multi-billion dollar institutions where I really cut my teeth managing capital on behalf of these large endowments and foundations. Part of it is when you have these multi-billion dollar portfolios, a lot of the consideration becomes this, it's an extension of the concept of asset allocation that individuals use for their portfolios, but it extends farther because the choices and the types of strategies, it's much broader.

One thing that institutions do very differently is that there is a much broader range of investment approaches and investment strategies that they are considering for their portfolios. And so I kind of liken it to seeing the world go from black and white to going to technicolor when you're investing on behalf of a large multi-billion dollar portfolio because all of a sudden the types of portfolios that you're building, the types of risks that you're able to take and consequently the types of return that you can generate from those different risk traces, it looks and feels very different from an individual investor who is typically speaking, investing in a combination of stocks and bonds. One aspect of it is simply that multi-billion dollar institutions have a much broader range of investment options and opportunities. A second piece of it is that as a consequence of that access to a broader range of investment opportunities and strategies, the way that large institutions invest looks and feels different in the sense that we're not necessarily investing just in a strategy or asset class. It becomes much more you are very aware of who the person or the people are behind these strategies that are being executed. And so there's this shift in mindset almost from not only do I need to know and understand that an investment strategy is compelling, I have the capacity to then also underwrite the investment team. And this is, I think, something that is very important to distinguish is that investing ultimately a large scale and more complex strategies goes to the importance of investing behind people and ensuring that there's an alignment behind the capital that you're investing. When I discussed, you know, individual investors and large multi-billion dollar institutions or ultra-high net worth individuals, there are these key differences where asset allocation looks different, risk assessment looks different relative to somebody who might be thinking about their portfolio and picking a stock or picking a bond or picking a fund. And so that's part of it. And then finally, I think the other key piece is because it is a larger pool of capital, because so much of it comes down to this asset allocation, this due diligence, the idea of having a more institutional decision-making framework, I think is something that is a really applicable skill set than really applicable concept, regardless of how much capital you are investing, whether that's, again, large multi-billion dollar institution or individual investor, there are still parallels in terms of decision-making and investment framework concepts that I think do translate. And so regardless of how we think about large institutions and the ways that they can deploy their capital, and the more choices that they may have in front of them, it still comes down to at the end of the day, how do you make those decisions and what is the type of framework that you use to exercise those decisions?