At this early stage, ESG investing is still best focused on institutions and family offices, said Seides, as low-cost, index-based ESG strategies don’t really create additional value for the end-client, and tailored, bespoke ESG strategies are difficult for a financial advisor to construct and manage at scale.
Seides also addressed the growth and maturation of the practice and profession of institutional investing over the course of his career.
“When I started, there were a handful of people doing this, and there are hundreds or thousands now, and they’ve evolved, gotten smarter and more sophisticated,” he said. “At the same time, investment markets are not a clear science—a lot of luck is involved. As the amount of practitioners and their skill increases, you find less variability and it becomes harder to differentiate. So it’s not clear that as investors become more sophisticated the end clients have better outcomes.
A good chief investment officer should have a broad skill set, said Seides, and in addition to investing must be able to speak, write, research, think independently, manage a team and define a mission for themselves and the organizations they represent.
Seides has now recorded over 200 episodes of his podcasts, which have been downloaded over one million times. Because institutional investors often have multigenerational mandates or a perpetual time horizon to invest within, the ups and downs of the markets and most social and political change doesn’t impact their investing framework. Thus, the first podcasts Seides recorded four years ago are still downloaded, listened to and applied by investors today.
“In the podcasts, there were two areas that drew me in more than any others, the first being the conversations about investing,” he said. “On the other side, there were a number of conversations with chief investment officers of endowments, pensions and sovereign wealth funds about what they do different than everyone else, business disciplines that aren’t investment disciplines like interviewing, decision-making, management and leadership.”
These disciplines aren’t typically taught to students and junior practitioners in the institutional investment realm. Rather, they’re part of the management training offered to C-suite executives. “Nobody gets that training in the investment world, but the people on the show made clear that they’re essential skills,. he said.
Seides’ first role in institutional investing was with the Yale University Investment Office under legendary investor David Swensen, which later led to roles at Stonebridge Partners and J.H. Whitney & Co. He later founded Protégé Partners, a firm that provided seed investments for hedge funds.
Launched in 2017, Seides’ podcast is intended to help fulfill the mission of his latest enterprise, Capital Allocators LLC, dedicated to educating and inspiring the next wave of investors.
“I came up with the idea for a book because, after so many episodes, I could no longer remember every conversation,” he said. “As it turns out, this book was the manual that I wanted to have on my desk for the investing I do.”
And about that famous bet with Warren Buffet: “If that were made today, it would be hard to do worse,” Seides said. “I think the odds of winning that bet today are lower than they were in 2008, but I think it would be easy to beat the outcome. The factors around hedge funds today make it much more difficult to outperform an index. Interest rates are now an additional headwind that we didn’t have back in 2008. Hedge funds have become more competitive. There’s more shorting and more challenges.”