Investing Into Uncertainty — Lessons from Endowment Investing

Warren Buffett once said on CNBC: “The world—there’s always uncertainty. Now the question is, what do you do with your money?”

Buffett may have been talking about public markets – even personal – investing. But even on the institutional side, given that we are continually surrounded by uncertainty and given that stuffing cash under a mattress – while relatively certain – carries no financial return, how should today’s institutional investors think about uncertainty?

More specifically, is there a way to consider uncertainty –use it as an investing philosophy – to drive outsized returns?

And if so, where can we turn for a guide?

It turns out there is a small group of long-horizon end investors who consistently perform well in private markets. Their superior performance in this area of investing has contributed heavily to their overall superior long-term performance.

That group is endowments.

And if investing into uncertainty feels like a potentially uncomfortable approach, it’s also one that Daniel Feder has discussed, practiced, and succeeded with for years.

Feder is the Managing Director of Private Markets at the Washington University Investment Management Company. That’s the group that runs the endowment for Washington University in St. Louis. Previously Feder served as Managing Director of Private Markets for the Sequoia Capital Heritage Fund, an endowment-style investment fund sponsored by Sequoia Capital. He also served as Senior Investment Manager in the endowment services area at TIAA-CREF, and Managing Director at Princeton University Investment Company, the investment office for Princeton University’s endowment, where Dan led the development of a $4.0 billion global private equity and venture capital portfolio.