#33 David Salem - A Deep Dive into Capital Allocation

This interview is a true master class for anyone interested in capital allocation and manager selection. We had the great pleasure to speak to David Salem, the Co-Chairman of New Providence Asset Management, a firm that provides investment office solutions for endowments, foundations and family offices. David is also a contributor to Epsilon Theory, an online community in which he writes extremely thoughtful articles about investment management and combines it with his passion for the game of baseball.

Before assuming his current post, David served as a Managing Partner at Windhorse Capital Management, which merged with New Providence in 2018. For almost two decades before that, David served as the Founding President and CIO for the Investment Fund for Foundations (TIFF), a non-profit investment cooperative that managed over $8bn on behalf of more than 700 endowed charities by the time he left.

We discuss many different topics during our conversation, which includes the Yale Model, which then became known as the Endowment Model and why David thinks it may be dangerous for institutions to try to replicate it. We also discuss David's framework for selecting money managers, what his due diligence process looks like and what he focuses on when meeting a money manager for the very first time.

The topics discussed include:

02:00 – David's background

06:00 – David's opinion what it takes to become a great investor

10:00 – The Endowment Model and why David thinks it may be dangerous for institutions to try to replicate it

16:00 – How does David thinks about diversification, as well as his thoughts on how to design an investment program

24:00 – David's thoughts on how one should account for human biases in the measurement of risk tolerance

33:00 – David's thoughts on Private Equity and crypto currencies

39:00 – David's personal process on how to select investment managers

43:00 – Characteristics David looks for (and seeks to avoid) in vetting money managers

49:00 – How does David prepare for a first meeting with a money manager, and what he spends the first meeting on

55:00 – What David thinks about the use of Investment Committee in making investment decisions

59:00 – How does David decide on how when to part ways with managers he has invested in

62:00 – David's thoughts on mentorship

Please keep in mind this is not investment advice. Full disclaimer at the end of the podcast.

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Luke, Leo & Andy