In This Issue

  • You can’t clone Yale
  • I’m searching for a Chief Investment Strategist
  • Interview with Sam Gallo, CIO, University System of Maryland Foundation
  • Five tasty restaurants in New York City


You Can’t Clone Yale:

Can you copy great endowment investment performance?  The Yale endowment, for example?

Reverse-engineering a good performer is probably achievable.  The key attributes can often be identified and, to some extent, duplicated.

But can you replicate great performers?

That’s a much taller order.  There’s always something slightly mysterious about greatness.

We were reminded of that fact when we looked at a recent white paper by Drew Knowles.  He’s the founder and chief investment officer of Berkeley Square Capital Management, an investment advisor in Denver.

“Invest Like an Endowment” is available here:

Mr. Knowles assembled data from NACUBO-Commonfund (NCSE) surveys and analyzed recent historical relationships between asset allocation, endowment size, and performance.  He did a good job and it’s worth reading.

As an investment advisor to (not necessarily wealthy) individuals he would like to demonstrate how they can use ETFs to replicate the investment performance of major endowments.  He’s particularly interested in showing the usefulness of so-called “liquid alternatives,” in which his firm seems to specialize.

He argues that this really can be done, at least to the extent of reproducing the average performance of big (over $1 billion AUM) endowments.

It would be even better if an amateur could match the performance of the very best endowments, such as Yale.  Unfortunately, his model says they can’t quite.  But he argues that his Yale Clone should still be an attractive portfolio for the average investor, and makes a good case for it.

Mr. Knowles suggests that an individual investor, by using certain low-fee index-tracking ETFs and rebalancing every year per the latest NCSE data, can do (very nearly) as well as the average big endowment with its professional investment staff and well-compensated external asset managers.  He only actually demonstrates this for 2003-2015, since not all his preferred tracking ETFs existed in earlier periods; but so far, so good. 

(This is not an altogether original idea.  Our friend Mebane Faber made a similar argument in his book The Ivy Endowment a few years ago.  But more and better tracking ETFs have become available since then.)


Mr. Knowles then attempts to reverse-engineer Yale, which hugely outperformed the average big endowment 1997-2014.  It earned an annualized 13.2 in that period versus 9.9 percent for its sisters.

He writes:

“While the Yale Clone mimics the actual Yale portfolio asset allocation to the best of its index-based ability, and matches the Yale endowment standard deviation, the Yale Clone lags its target by three-percent a year.

It is highly evident that the Yale allocators add alpha (300 basis points a year!) by picking active managers that handily beat comparable indices.  Yale’s endowment consistently allocates capital to first quartile managers… Such winning allocations compound in Yale’s favor to the benefit of the school.”

I recently had a chance to talk to some people close to Yale and tried to hone in on how that “picking active managers that handily beat comparable indices” thing is actually accomplished.

As many of our readers might suspect, it’s not really all that mysterious; but it’s hard to do in practice if you’re not Yale, and very difficult to replicate.

An elite school can often detect unusually talented people when they are still students, track them into their professional lives and become early investors.  We should underline “can,” because not even all the elite schools have demonstrated the ability to do this as consistently and effectively as the Yale Investment Office under Dr. Swensen and his team.

That applies to startup external fund managers.  But it also applies to Yale’s internal staff, which judiciously draws from the same best-and-brightest cohort.

There’s a story abroad that I hear is true.  Years ago, a senior Yale officer working after hours happened to look into a wastebasket full of resumes of people applying to work at the YIO.

He spotted a young Yalie with an unusual background: sixteen years as a world-class professional ballet dancer, who was now raising a family and currently earning an econ degree.  A check with his professors indicated that he was an outstanding student (who would soon graduate summa cum laude).  So, Robert F. Wallace was brought in as an intern, then subsequently as a full-time associate for four years.

That’s the same Robert F. Wallace who was recently hired as chief investment officer at Stanford Management Company.

In our story about Mr. Wallace a few months ago we opined that he himself was clearly trying to replicate Yale’s performance and offered some evidence for that assessment.  That won’t be easy to do, but he probably has a better shot at it than Mr. Knowles with his Yale Clone portfolio.


In our conversation with Erik Lundberg, chief investment officer at the University of Michigan endowment a while back, he indicated that he is also well aware of this tactic.  He said he keeps very careful track of his graduates and networks with them to access investment opportunities.


Michigan is a terrific school with a well-run endowment, but it’s still probably not as favorably situated culturally or geographically as Yale vis-à-vis the very top tier of fund-managers.

For the rest of you, there’s always Mr. Knowles’ Yale Clone.  It seems to be doing better than most big endowments, albeit with a higher standard deviation than either the average big endowment or Yale itself.

Here’s the performance of Mr. Knowles’ Yale Clone versus Yale, a 60/40 portfolio, and the NCSE over-$1 billion endowments from 2003-2015:

Comparative Performance: 13 years 2003-2015



Yale Clone

NCSE>$1 bn


Annualized Rtn %





Std Dev %






Berkeley Square Yale Clone Portfolio:         



Index used

Tracking ETFs 


Allocations FY2014

Domestic Equity

S&P 500 Index

(SPTR Index)


Foreign Equity


(MXWDU Index)


Fixed Income

Barclays Aggregate Index



Absolute Return

HFRI Fund Weighted Composite (HFRIFWI Index)


Real Assets/Real Estate

Dow Jones REIT Index

(REIT Index)


Natural Resources

S&P No. American Natural Res. Index (SPGINRTR Index)


Private Equity

Cambridge Assoc. US Private Equity Index (Note 1)



Barclays 1-3-month Treasury Bill Index (LD12TRUU)


Note 1: Cambridge PE has no tracking ETF.  Red Rocks Capital ETF used as proxy. 


Skorina is seeking a Chief Investment Strategist:

This will be the head investment position at a $25 billion-dollar, multi-asset class, institutional and high net-worth money manager in the Mid-Atlantic area.

The successful candidate will probably be an executive investment officer at a large institutional fund, such as: a top-tier asset manager; an investment bank; or a large endowment, foundation, or pension.

He or she will have management and research experience with all asset classes: global equities, fixed income, and alternatives (including hedge funds, private equity, real estate, commodities, and real assets); be a comfortable, effective public speaker; and have substantial experience dealing directly with clients.

Compensation for this key position will be highly competitive.



A conversation with Sam Gallo, chief investment officer at the University System of Maryland Foundation:  

My friend Sam Gallo has just finished the two-year executive MBA program at the University of Chicago (Chicago Booth School of Business).  He graduates this month with a stellar academic record after commuting every other weekend for two years from D.C. to Chicago while running the Maryland endowment and keeping a family happy and intact.  No small accomplishment!

Students in Chicago’s exec program get exactly the same professors and curriculum as the full-time cohort.

Along with their twice-a-month weekend commute, the exec students spend three full weeks at the Chicago campus, one week at the London campus and one week at the Hong Kong campus.  It’s a tough grind for students with demanding full-time jobs. 

In Sam’s case the day job is running a $1 billion endowment for the 21 schools in USM system, including the flagship University of Maryland at College Park.

Skorina: Sam, you’re just about to complete your forth year as CIO.  What have you learned, and what changes have you made on your watch?

Gallo:  Charles, when you first called me about this positon, you said it would probably be the best job I ever had, but that it would take a lot longer to get things done and would be far more complex than anything I had experienced as a hands-on money manager.  And that’s been absolutely true.  There are just a lot more moving parts when you’re helping to lead a big public institution.

Skorina: Can you give me an example or two?

Gallo:  One important change: we tightened up the endowment governance so that investment decisions could be made much more quickly.  Sometimes you simply must move rapidly as markets change.  Most endowment boards meet only once a quarter and decisions are often deferred.  

Now we have a streamlined three-board-person approval process that can operate whenever a decision needs to be made.  This really speeds up our ability to take advantage of market changes and opportunities.  The full board is notified, of course, and must ratify all decisions; but we can move pretty fast when we need to.

Skorina: How about the portfolio?  What’s different now?

Gallo:  We’ve done a lot of work on the portfolio.  The average endowment makes seven to ten investments a year.  Over the last four years we’ve taken about ninety investment actions and the payoff has been substantial.

We’ve tried to quantify the impact of those changes.  We back-tested the performance of the portfolio I inherited versus our actual allocations over the past four years.  Those legacy holdings would have delivered an annual return of about 5.4 percent, versus the 10.2 we’ve actually achieved.

That’s not to say that my predecessors wouldn’t also have made appropriate adjustments.  But an analysis like that gives us some confidence that we’ve made mostly good decisions.

This is not a set-it-and-forget-it investment climate.  It’s tough, and we’re not complacent.

Skorina: So, active portfolio management is alive and well at Maryland?

Gallo: It’s just a lot of little wins, Charles; and we’ve had to work hard for every one of them.

Skorina: Sam, most endowment investment offices have small staffs.  I think the average size is three to four investment professionals, including the CIO.  So how does a CIO generate ideas and keep up with the demands of investing globally?

Gallo:  Good question, Charles. 

In my case, during the last four years I’ve traveled over 200 thousand miles and my staff and I have met with over a thousand investment managers.  Also, we have developed a support network of about 300 informal advisors I can look to for advice and support.  And from what I hear from my peers, I’m not leading in the mileage and networking derby! 

I have great staffers who have put in long and productive hours.  I’m very grateful to them.  And I work with a board and foundation management who understand and support what I’m doing.

We’ve gone from a bottom-quartile performer to one that in 2015 outperformed its key internal benchmarks, and then beat its peer universe by 160 bps. 

Skorina: Happy four-year anniversary, Sam.  And congratulations on finishing your MBA.  You’re now a fellow University of Chicago alum and you can expect to receive your first request for a donation any time now. 

Any thoughts on the Chicago program or advice for others?

Gallo: It was a lot of work, but worth it.

I met over 200 amazing lifelong friends, learned how to survive on 3-4 hours of sleep a night, eat healthy while on the road.  And I lost over 40 pounds!

But best of all, my wife and kids still love me.

Skorina:  Good priorities, Sam.  All the best.

Gallo: Thanks, Charles!  Always good talking to you.



A few highly personal comments on five NYC restaurants

I spent February in New York meeting senior money managers and interviewing candidates for my latest chief investment officer search.  Mostly I fixed modest meals in my apartment until my wife flew in to enjoy the last week and together we sampled a few restaurants. 

Karen is a seriously fine cook and a knowledgeable foodie, so she’s always on the lookout for excellent restaurants at a good value.  On this trip we found five serving excellent food at reasonable (for New York) prices.

In no particular order:


This spare, rectangular café layout in Williamsburg, run by Chef Jason Marcus, was a particular delight.  Light on décor (they’ve clearly invested their money in the super-fresh and delicious ingredients) but packing a punch in flavor combinations.  

We ordered the tasting menu which consisted of nine small dishes and two desserts.  Highlights were the day-boat scallops with red quinoa “risotto”, Macintosh apple and black and red currants; Duroc pork osso buco slowly roasted in milk and sherry with fresh lima beans; and seared foie gras with new gold potatoes, bacon, sunny-side egg, maple and hot sauce.  

Each course was prepared in clever and inventive new ways.  We loved it.  The tasting menu cost fifty dollars per person, an exceptional value in pricey NYC.  Our wine was Blaufrankisch, an Austrian red from Wachter-Wiesler “Bela Joska” 2013, at 56 dollars.  Hands down the most satisfying restaurant meal of the month.


229 S 4th Street

Brooklyn, NY 11211

Phone: (347) 844-9578


The NYC branch of chef Enrique Olvera’s Mexican restaurant empire adds a new-age twist to some south-of-the-border classics in small dishes with regional spices and eclectic touches.  Standouts were an uni tostada with bone marrow salsa and cucumber ($19); beef tongue with lettuces, nopal and chicatana coffee oil ($24); and octopus with hazelnut mole, pickled potatoes and watercress ($29).

Karen had a margarita.  Not quite as delicious as the ones at the historic San Angel Inn in Mexico City, but still a great cocktail.  The bill for five food items and the drinks, plus tip, $163.


35 E 21st Street

New York, NY 10010

Phone: 212-913-9659

Chef Enrique Olvera and staff


Located in the West Village, L’Artusi has been open for eight years and I’ve eaten there many times.  Karen loves it, usually ordering an appetizer or two and always the sweetbreads when they’re on the menu.  I order whatever fish catches my eye that day; cod, sea bass, or arctic char – they nail it every time.  Even with the mostly young hip crowds filling every table, or even when it’s late, I’ve never been disappointed.  It’s a stylish open kitchen, Italian-inspired bistro on 10th Street just west of Bleecker.

Gabe Thompson and Joe Campanale are the owners (I think Gabe is the executive chef)

Dinner for two with wine and tip, usually about $150


228 W 10th Street

New York, NY 10014

Phone:(212) 255-5757


Sixteen years in operation and still going strong.  This tiny and quirky French-American gem headed up by chef-owner Gabrielle Hamilton has been one of our favorites for years.  Ms. Hamilton never went to culinary school or apprenticed in restaurant, but somehow, in one of the most competitive restaurant cities in the world, she has prospered.

I had the whole branzino baked in salt and Karen enjoyed pan-fried skate, both with some veggies on the side.  My fish was excellent; the skate was even better.  With a bottle of French white and tip, the bill ran about $135.  We keep coming back.

In the East Village, on First Street, just a few hundred feet from First Avenue and Houston


54 East 1st Street

New York, NY 10003

Phone: (212) 677-6221

Chef/Owner: Gabrielle Hamilton


One of my longstanding clients, Jon Hirtle (Hirtle Callaghan) loves this tiny West Village staple and now I know why.  Possibly smaller than a hole-in-the-wall, this lovely, very French café run by Jody Williams serves sandwiches, French style pizza, croque monsieur, housemade charcuterie, and assorted tartines.  And excellent cappuccino and lattes.  The wine’s not bad either.  About $82 dollars for a late tasty lunch.


42 Grove Street

New York, NY 10014

Phone: (212) 255-3590

Chef/Owner: Jody Williams

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