“Princeton’s Alternatives Portfolio in a Time of Great Financial Uncertainty”, an interview with Andrew K. Golden, President, Princeton University Investment Company

An Interview from Vintage VC and PE Summit 2020

Maytal Ross interviewing Andrew K. Golden, President Princeton University Investment Company (PRINCO), about Princeton’s Alternatives Portfolio in a Time of Great Financial Uncertainty

Andrew K. Golden’s Bio:

Andrew K. Golden has served as President of the Princeton University Investment Company (“PRINCO”) since January 1995. During his tenure, PRINCO’s investment performance has ranked in the top percentile among institutional investors. The endowment has grown from under $4 billion to over $26 billion, after spending outflows of $13 billion, and today, endowment spending pays for more than half of the University’s operating budget. Mr. Golden joined PRINCO from Duke Management Company where he was an Investment Director. He was previously a Senior Associate in the Yale Investments Office. He currently serves on fund advisory boards for several managers, including Bain Capital, General Catalyst Partners, and Greylock Partners. He was a member of the Board of Directors of the NAB Asset Corporation, a publicly-traded commercial loan workout specialist, as well as a founding member of the Investors’ Committee of the President’s Working Group on Financial Markets. In addition to his work at PRINCO, Mr. Golden serves as a Trustee of the Princeton Area Community Foundation, the Rita Allen Foundation, and Rutgers Preparatory School, and is on the Board of a private family office. He also serves on the Investment Advisory Committee of the Edmond J. Safra Foundation. Mr. Golden holds a B.A. in Philosophy from Duke University and an M.P.P.M. from the Yale School of Management. He has earned the Chartered Financial Analyst designation and is a member of the New York Society of Security Analysts.

Interview Transcript 

Maytal Ross:

Hello, everyone. I’m very excited to introduce Andy Golden, President of the Princeton University Investment Company, one of the largest and top-performing university endowments. Prior to Princeton, Andy held investment positions at the Duke Management Company and Yale University Investment Office. And before investing, Andy started his career as a professional photographer. So thank you, Andy, for joining us today.

Andrew Golden:

Thank you for having me. My pleasure. Nice to see you.

Maytal Ross:

Great. So, as I mentioned, you started your career as a professional photographer. How did you go from photography to managing one of the largest and best-performing university endowments?

Andrew Golden:

Actually, I started my career as a bartender and a stagehand, basically carrying heavy things in order to support my aspirations as an artistic photographer. And I was super excited to get my first-day job as a photographer, where I worked basically in graphic arts. When the woman, who is now my wife, started law school, I moved and took a job in a very different kind of place, where I ended up being the de facto manager of a 10 photographer studio, the in-house advertising group for a department store chain. And that got me much more interested in [inaudible 00:01:25] of organizations and how they run. So to satisfy that urge, to learn more and to be part of a solution that enabled workers to share more in the productivity gains that they had produced, I applied to the Yale School of Organization and Management.

Andrew Golden:

Now, at the time, my fiance was going to come to Yale with me and take her third-year law school at Yale, but she had an amazing opportunity to do some teaching in her third year. So I deferred my admittance and thought I’d try something very different. I answered an ad in a newspaper, took a math test, and went to work for a small money management firm. And I really found great interest in thinking about how markets worked.

Andrew Golden:

I was confused as to what to do, which career path to pursue. When I arrived at Yale, I thought investing might be really interesting, but I wanted to do something that more directly promotes social good. I had heard about this thing called socially responsible investing. I thought that might be interesting. I’d also heard that a recent alum of the Yale School of Management had joined the Yale Investment Office. His name was Dean Takahashi, and he had previously been doing community economic development work.

Andrew Golden:

I didn’t know enough to know that those two things were different. I went to see him for an informational interview. He convinced me fairly quickly that socially responsible investing was likely to be a disappointing career, maybe a suboptimal approach to making a change in the world. He used what I now call the toaster of an argument that socially responsible investing, like a toaster oven, it’s not going to toast as well as a toaster, and it’s not going to bake as well as an oven. But if I want to do good while investing, the Yale office was looking for an intern.

Andrew Golden:

So that put me at kind of ground zero, at time T plus 2, when Dave Swenson and Dean were really revolutionizing the way endowments, if not all institutional investors approached their craft. So I ended up staying there for a while and absolutely loving it. And the only thing that caused me to leave was the fact that the pay there was so bad.

Andrew Golden:

The industry itself had bad pay, but Yale in particular paid badly. And I knew that we weren’t going to… We had a ton of student loans. Our total student loans was a multiple of what my wife and I were making. And I knew we would never own a house at that rate. And so Dave actually helped get me an offer to come to Princeton. I had worked myself to get an offer to go to Duke. At the time Princeton was going to triple my compensation. Duke was a mere double. So I took Duke. I took Duke in part, in all seriousness because it was the old school tie. I went to Duke as an undergrad. And because the office was going through an interesting transition period.

Andrew Golden:

So we went off to Duke and we thought that was it, we’d be there forever. And 18 months later, Princeton called back and said, “Actually, instead of coming in at the level we had discussed, would you like to head the office?” And that was an offer that was going to be hard to say no to. And so that was almost 26 years ago and the rest has been just a fun ride.

Maytal Ross:

Yeah. I’m sure it’s been a… That’s a great story and a wonderful 26 years now. So now as the president of the endowment, how do you think more broadly about asset allocation?

Andrew Golden:

I think any investor should really hone in on what are their investment objectives and where do they have advantages, and where don’t they have advantages. And construct a base level plan for where they should put their assets. We add a layer of complexity that may or may not be needed, where we say, “Looking at the things I just described, and the basic truths of investing, how should we tilt the portfolio versus other investors?” And we’re looking at that long-term plan in a valuation independent framework. We’re not saying that anyone particular category at this point is going to do better than any other category. We’re just saying, “Where should we, on average, be?” A $26 billion diamond should be invested differently than the funds for an 80-year-old widow.

Andrew Golden:

We then do a stage where we say, “Is there anything that’s really out of whack in the world or in our own circumstances that we should tilt that?” But what that long-term plan, what we call the policy portfolio, provides us, is a default position, a kind of safe harbor if you will, for those times when we’re not sure about the world.

Andrew Golden:

There’s an old saying that the most dangerous words in investing are, “It’s different this time.” I think the most powerful words in investing are, “I don’t know.” And so what do you do when you don’t know, which is most of the time for me? If you want someone not to know something, I’m your guy. And what are you going to fall back to?

Andrew Golden:

So that’s where we end up being very heavily weighted in potentially high return asset categories, and in categories that speak to our circumstances. So I know you want to talk about venture. If you think about the perfect fit for us, the ability to take a long-term view, the ability to get access to the best venture capitalists in the world, the ability and the desire to act as a partner to those venture capitalists.

Andrew Golden:

There’s an old saying that good clients make for good architects. And we like to think that that’s true across our portfolio, where we’re dependent much more on the wisdom expertise of our individual managers than we are about overlaying grand asset allocation plans. Much more desirable to deal with from a bottom-up basis where frankly, it’s easier for folks to have an edge, and where you’re getting the benefit of many, many bets taking place at one time. So you have the law of large numbers of working for you, as opposed to the law of small numbers working against you, where if you focus on macro things, no one’s going to get it right all the time. And the downside, again, you’re wrong when it’s moving a bunch of your portfolio is [inaudible 00:09:56].

Maytal Ross:

That’s great. So speaking of the venture, your venture portfolio, I would love to know if there’s something very specific that you look for when partnering with a venture fund.

Andrew Golden:

Sure. So, venture is the poster child for investment arenas, where it’s not just about value recognition, it’s about value creation. So clearly we’re looking for venture managers who are going to be able to help make the companies they invest in better. Great. And so that’s a very important element, which would tilt us towards firms where there’s some operational expertise.

Maytal Ross:

Okay, got it.

Andrew Golden:

Now, another way of looking at it is the venture firms themselves are multi-dimensional partnerships with the world. And maybe the three most important things in venture are deal flow, deal flow, deal flow, or access, access, access to the most intriguing, best entrepreneurs.

Andrew Golden:

And so there’s a certain quality described as it’s good to be with people that you know the rest of the world is going to root for. And we like to think that among the things that facilitate that or that create that desire of the rest of the world are people who behave with a real partnership mentality, a real relationship mentality, not a transactional mentality, and where they’re excited about the possibilities of value creation, meaning the possibility of aiding and abetting the creation of great companies across our portfolio. Maybe this is the simplest way to describe it.

Maytal Ross:

Great. I think-

Andrew Golden:

We’re looking for what I would call… Yeah.

Maytal Ross:

Sorry to interrupt you. I think we might be running a little low on time. So I wanted to get to one last question that I think is very top of mind for many people nowadays. So diversity is a pretty big issue in the venture and startup community. And I was wondering what Princeton as an LP is doing to kind of help increase diversity in the ecosystem.

Andrew Golden:

Right. So diversity is a super important issue to us. And of course, it’s nice to be part of a solution that’s going to make society better, but it’s also the case that we think we’re going to make a whole lot more money if our manager roster in general, across all categories has improved diversity.

Andrew Golden:

There are multiple ways of a win here, access to talent pools that are under access. Right there, you’re more likely to hit great talent. I mean, people that look like me have been benefiting from protectionism against people who don’t look like me is self-defeating. So broader access to talent pools is important, but there’s also the synergy of the actual diversity. And a lot of studies show that when you’re facing the complex problems that are involved in investing and in venture in particular, you’re going to solve them a whole lot more easily if you’re approaching it with a diverse team.

Andrew Golden:

So what are we doing to be part of the solution? We’re taking a multi-dimensional approach. So in some cases, part of that is investing with already diverse firms. And the venture capital industry is an interesting arena because the barrier to entry of creating a new firm is a lot lower than in other categories.

Andrew Golden:

So if you look at the past two years, we’ve hired five venture capital firms total, and all five of those would qualify under some definition of diverse leadership. Now, that’s at the top. But we’re not going to solve that [inaudible 00:14:56] for the industry if that’s our only approach. So we also want to work with our current rosters to see how we can help them, what I call not yet diverse firms, become diverse firms.

Andrew Golden:

We’re also working to see if we can help facilitate a better pipeline. Venture has got a difficulty here. It’s got the opportunity of lower barriers to entry, but it’s got the difficulty of what I said before is that we’re looking for people with operational experience, and the tech industry itself is not particularly diverse.

Andrew Golden:

By the way, when we talk about diversity, we’re covering a broad range of dimensions. And the barriers, I think for say, gender diversity are quite different than the barriers for racial diversity, particularly with respect to the least represented groups. So we’ve got to deal with this thoughtfully and figure out what the right solution is for those two different buckets because I think they’re a little bit different. And I can go on about this but [crosstalk 00:16:17].

Maytal Ross:

No, no. I think that’s great. And it’s amazing to hear what such a powerful place like the Princeton Endowment is doing in taking this so seriously. So I think it’s appreciated by all of the diverse communities.

Andrew Golden:

Well, to be clear, we’re trying. I would say that we’re probably among the least bad at helping improve diversity. I don’t want to come off as sounding like we’ve got this figured out. But right now we’re at the aspirational level and trying to make some efforts.

Maytal Ross:

Great. And then I think just one additional thing, as far as venture goes, is there a particular investment area in the world of venture that you find most exciting and that you are pursuing?

Andrew Golden:

No. We are dependent upon the quality of our managers, and we focus much more on talent than what fishing pond they’re playing. And so again, our secret sauce is to partner well with a promise of long-term partnership. And we have found that through good and bad markets, that pays off more than trying to time any one particular area.

Maytal Ross:

Very helpful. Thank you. It’s been such a pleasure speaking to you. Thank you so much for your time and thank you for joining us.

Andrew Golden:

My pleasure. I appreciate it.

Maytal Ross:

Great.

 

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