Bruce MacDonald – The Playbook for Building a Mid-Sized Endowment from Scratch (EP.495)
episode
Capital Allocators – Inside the Institutional Investment Industry
1h 4m
1 speaker
8 chapters
transcribed 1 month ago
Transcript
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Transcript generated automatically by AI and may contain errors.
Who is Bruce MacDonald and what is his role at VCU’s endowment?
When there's just five of you, you can't do everything. You have to make a choice about things to leave out. Because you're leaving out a lot, you really have to be focused on picking the right things to lean into. Our portfolio probably looks a little bit different in that there's a lot of things that we've decided to not spend our time on because we believed we'd be better spent spending time elsewhere. Things like private credit, China, Latin America. America, Africa, we decided to keep focused on other areas of opportunity. Market timing is a mugs game, as one of my old bosses said. Endowments have an unfair advantage in that we work with the smartest investors out there. It's not necessarily market timing when your expert in emerging market companies comes to you and says, My companies have never been cheaper.
We are seeing opportunities. Opportunities we have never seen before. That to me is backing good investments. Historically, endowments have done a great job of that, but in the last 10 or 15 years with the obsession of private assets, that tool has been taken out of the toolkit. We pride ourselves in keeping that tool in the toolkit. We have abundant liquidity to stay in, step into dislocations, either at the manager level or at the the market level.
I'm Ted Sidies and this is Capital Allocators. My guest on today's show is Bruce McDonald, the CEO and CIO of the Virginia Commonwealth University Investment Management Company, which runs $2.5 billion for VCU's endowment and health system. Bruce joined the university in 2015 and shortly thereafter had the opportunity to sell the portfolio and start fresh. Since being promoted to CIO in 2022, VCU has been a top decile performer with a team of just five investment professionals. Our conversation covers Bruce's unconventional path from a religion major at Wesleyan to fixed income investing at Putnam and endowment roles at Columbia and UVimco before arriving at VCU. We discussed the principles of VCU's approach, including building a portfolio around secular tailwinds like India, Vietnam, gold, and artificial intelligence, while maintaining abundant liquidity.
to act countercyclically during market dislocations. We explore VCU's team-based underwriting process, lessons learned from mistakes, and personal influences that shaped Bruce's investment philosophy. Before we get going, it's travel season. Partner meetings, board meetings, the Capital Allocators CIO Summit, Omaha for Berkshire, and Milken. Across planes, trains, and automobiles, you're bound to run into a few snacks. When they're unavoidable, I try to remember Will Gadaro's story of the pilot who lifted everyone's spirits by bringing families into the cockpit. But it's not always easy, which leads to my most recent pet peeve. I was on a flight with some unfortunate delays. We were scheduled to land from a cross-country journey at 1130 p.m., but got diverted from New York to Philadelphia because of weather at just the wrong time.
After a gas and go stop that took about an hour, we finally landed at 3 a.m. And at that time, there's only a scant crew working at hangars, so we waited another hour on the tarmac. None of that was anyone's fault. But after a long flight and equally long day, you can imagine everyone was ready to go home. All the passengers queued up to depart one by one in an orderly fashion. It's actually uncanny how respectful people are when getting off plants. But there's a moment when it's your turn to get moving, and on this particular flight, after eight and a half hours, the person in the row in front of me seemed oblivious to the cadence of the queue. When it was his turn, he arose, seemingly clueless, and forced everyone behind him to wait.
Of course, this wasn't just a grab your bag and go. Two bags, maybe three, come down from above. Then he pauses to put on his jacket, then reorganizes his bags to put a backpack on top of his wheelbag, and then without as much as an I'm sorry, he slowly started walking off the plane. Not a single movement in his deep planing occurred until after the person in front of him had started walking.
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Chapters
8 chapters
1
Who is Bruce MacDonald and what is his role at VCU’s endowment?
0:00–9:11
2
How did Bruce’s unconventional path—from religion major to fixed‑income specialist—shape his investment philosophy?
9:11–15:19
3
Why did VCU decide to sell its existing portfolio and start from scratch in 2015?
15:19–23:44
4
What are the core principles of VCU’s investment process and how do they balance liquidity with risk?
23:44–31:30
5
How does VCU identify and invest in secular tailwinds like India, Vietnam, gold, and AI?
31:30–40:24
6
What is VCU’s team‑based underwriting process and how does it manage manager risk?
40:24–48:21
7
What mistakes has VCU made and how does the team learn from burning‑building experiences?
48:21–55:57
8
What personal influences and leadership lessons does Bruce credit for his success?
55:57–1:04:46