Institutional Investors: Charting the Course | Global Conference 2025

Panelist Fund Profiles and Liabilities

• Children's Hospital of Philadelphia (CHOP): Manages a ~$3.4B endowment with a focus on preserving financial health and research funding; maintains a double-A credit rating.
• State of Wisconsin Investment Board (SWIB): Manages ~$140B for the Wisconsin Retirement System (a defined benefit plan covering ~700,000 members); fully funded due to a unique "risk-sharing" design where benefits are fixed nominal unless investment returns exceed 5% annualized over five years.
• Delta Airlines: Operates a $15B frozen defined benefit (DB) plan (106% funded) and a $35B 401(k) plan; DB plan aims for a 7% annual return to maintain surplus, while the 401(k) uses passive target-date funds with <10 basis point expense ratios.
• UCLA Foundation: Manages ~$5.5B total ($4.5B endowed) with a perpetual investment horizon; target is a 5% real rate of return, necessitating a high equity bias.
• Single Family Office (Lupe Rodriguez): Based in La Jolla and Mexico City; prioritizes multi-generational thinking over quarterly returns, focusing on societal impact and structural deals.

Investment Horizons and Strategic Shifts

• SWIB: Plans on a 5–10 year horizon despite actuarial models running 30–50 years; currently adopting a "wait-and-see" stance on asset allocation until U.S. tax, trade, and immigration policies are finalized.
• Delta (DB Plan): Faces a "barbell decision" between short-term risk transfer (buying insurance annuities) and long-term surplus maximization; effectively a 30% private investment, 40% hedge fund, 10% public equity mix.
• UCLA: Maintains a long-term strategic asset allocation (decades), emphasizing liquidity for obligations and taking advantage of market dislocations rather than reacting to short-term data.
• CHOP: Acknowledges reduced flexibility for illiquid investments due to complex healthcare funding needs; pivoting toward cash flow underwriting and "thinking again" regarding blind spots in grant-making.

Geopolitical and FX Adjustments

• FX Exposure: Most panelists are not shifting heavily away from the U.S., but are increasing non-U.S. exposure in public equities (UCLA, SWIB) due to valuation and efficiency.
• SWIB & UCLA: Currently overweight non-U.S. public equities; SWIB eliminated U.S. home bias in public equities years ago, a decision recently validated by market performance.
• Delta: De-risking by reducing duration in long-term Treasuries, moving to 1–3 year Treasuries and MBS, and reducing private equity exposure slightly while increasing private credit.
• Lupe's Family Office: Shifting focus from nation-state investing to structural themes like nearshoring, border security, and digitization; not shying away from the U.S. but seeking global cash-flow assets.

Private Markets and Secondary Activity

• Market Context: Observations on Yale and others selling venture capital stakes suggest a potential influx of supply into the secondary market.
• Delta: Willing to sell existing private equity if required for insurance transactions but unlikely to buy today due to poor resale value (discounts of 65–72 cents on the dollar for older funds); paused LP secondary investing in 2025.
• SWIB: Maintains a strategic path to increase private market exposure to 33–35% (currently ~30%); acting as a buyer if pricing is attractive.
• CHOP: Not buyers at current prices; considering selling parts of the portfolio via secondaries but prioritizing other liquidity levers first.
• UCLA: Experiencing a shift where distributions now exceed calls in their private equity portfolio; avoiding secondary purchases of broad manager portfolios due to lack of due diligence capability on unfamiliar assets.
• Lupe's Family Office: Spun out a dedicated VC fund ("1200 VC") to align with Gen Z values; exploring alternative private equity structures (e.g., operator-led models) rather than traditional buyouts.

Hedge Fund Allocations and Strategies

• Delta: 40% allocation to hedge funds, viewed as an active risk tool rather than an asset class; aims to beat borrowing costs by 120 basis points annually using portable alpha and derivatives; runs a highly diversified book of ~40–50 funds.
• SWIB: 7% allocation (~$8–9B) to an "alpha beta overlay" portfolio; historically outperformed financing costs by 600 basis points over the last three years; maintaining stable allocation.
• CHOP: Currently ~10% allocation; performance has been mixed, leading to a cautious stance on increasing exposure despite a theoretical desire to add.
• UCLA: Reduced allocation from ~40% to ~10–12%; views traditional hedge funds as having high correlation to markets and illiquidity; prefers investment-grade CLOs for similar return profiles with better liquidity.
• Lupe's Family Office: Explicitly avoids hedge funds; prefers direct structured deals and cash flow assets.

Asset Class Specifics (Rapid Fire)

• Cryptocurrency (Bitcoin): Generally avoided for direct exposure; SWIB and Delta utilize small arbitrage strategies (~10–50 bps) based on market inefficiencies; Lupe's office runs a dedicated "Alpha to Omega" crypto/blockchain strategy.
• U.S. Real Estate: Mixed reactions; CHOP acts as a seller of healthcare REITs; others view real assets (infrastructure, lending) favorably in a potential stagflationary environment.
• Currency Preference: Delta and UCLA prefer the Japanese Yen (viewed as significantly undervalued) over the Euro for the short term; SWIB and UCLA long-term tilt toward Europe or emerging markets (including China) despite regulatory risks.

Forward-Looking Statements and Macro Outlook

• 2025 GDP/Market Forecast: Most panelists anticipate a wild ride with the S&P 500 potentially lower by year-end due to valuation concerns and stagflation risks; Delta specifically increased probability weighting for a stagflationary environment.
• Regime Shift: Delta and others note a potential regime change where stocks and bonds show positive correlation, driven by inflationary pressures and policy uncertainty.
• Retirement Readiness: Delta considers shifting surplus from its frozen DB plan to augment 401(k) matches but remains open to hybrid plan structures; currently contributes $1.3B annually to 401(k).
• Emerging Themes: Lupe's family office highlights impact investing and intergenerational capital transfer as key drivers; UCLA sees alpha opportunities in non-U.S. small caps and China A-shares despite regulatory headwinds.