Southern Methodist University in Dallas, Texas, recently completed its Second Century Campaign, celebrating 100 years and raising over $1 billion. Though only 31, Philip Griffin, director of investments and himself an alum, has been part of SMU’s four-person investment team for over nine years. Named to Trusted Insight’s Top 30 University Endowment Investors in Hedge Funds, Mr. Griffin graciously took the time to speak with us, on October 6, about the portion of SMU’s $1.5 billion endowment invested in hedge funds. The following interview has been edited and condensed.
Trusted Insight: Thank you for speaking with us. How much of your endowment is invested in hedge funds?
Philip Griffin: About 25% of assets are currently in hedge funds. We’re at our target allocation, between $350 and $400 million.
Trusted Insight: Are you responsible for the hedge fund portion of the endowment?
Philip Griffin: Yes. We are a small team and everyone is a generalist. It forces you to be disciplined and understand the role of every manager and strategy in the context of the entire portfolio.
Trusted Insight: How many hedge funds are you invested in?
Philip Griffin: We run a concentrated portfolio and currently have 15 relationships [with hedge fund managers].
Trusted Insight: Typically, how long do you stay with your hedge fund managers?
Philip Griffin: Most of our relationships are longer term; we typically don’t look to partner with a manager unless we think it’s going to be a three-to-five-year investment, if not longer. We have one hedge fund manager that’s been in our portfolio for over 20 years.
Trusted Insight: Do you look for any hedge fund strategies in particular?
Philip Griffin: Over the last several years the portfolio has shifted out of credit and become more equity-oriented. We aren’t focused so much on a particular set of strategies, but more on identifying talented investors with an ability to generate alpha.
Trusted Insight: Have your hedge funds performed as you expected?
Philip Griffin: Over the long term, yes. We look to our hedge fund program to lower the beta and volatility of the portfolio and generate returns that are uncorrelated with the rest of our portfolio.
Trusted Insight: How have your returns been?
Philip Griffin: We target equity-like returns over the long term. Although we have lagged the equity market during the bull run of the last six years, over the last 10 years and longer we have performed better than equities.
Trusted Insight: What is your investment philosophy?
Philip Griffin: We’re more biased toward bottom-up, fundamentally-oriented value strategies. We have less of a focus on quantitatively-oriented or trading strategies. We don’t have a specific mandate for X% in any strategy.
Trusted Insight: What do you look for in a fund manager?
Philip Griffin: We look for original thinkers with a proven process that is repeatable. We are always asking ourselves, what is the manager’s edge? Do we understand their process, is it repeatable, and can it generate alpha going forward?
Trusted Insight: Is that all?
Philip Griffin: We look for good partners we can trust.
Trusted Insight: Describe your career trajectory that has culminated with this position.
Philip Griffin: I’m an SMU alum. I joined the endowment office in a part-time capacity right after graduation. I’d majored in finance, but was actually pursuing music professionally at the time. (I minored in music and was classically trained on the double bass.) Finance seemed like a good back-up plan in case the music dreams didn’t pan out. Music is a passion of mine, but it’s an extremely tough business. Fortunately, I was really enjoying my role at the endowment and found a passion for investing as well. I was offered the opportunity to join as a full-time analyst a little over a year after I started. I’ve just tried to improve every day and haven’t looked back.
Trusted Insight: Do you play professionally at all?
Philip Griffin: Not anymore, although I’ll occasionally do concerts or production work with some of my friends that are still in the music world.
Trusted Insight: What do you like the most about your job?
Philip Griffin: I love the fact that I get to talk to so many smart, driven people on a daily basis.
Trusted Insight: What’s the most exciting thing going on at SMU right now?
Philip Griffin: Most recently we celebrated our 100-year anniversary and announced the completion of our $1 billion capital campaign. It was a great opportunity for our alums to come back and celebrate that milestone.
To learn more about the top endowment investors in hedge funds, check out Trusted Insight's list of Top 30 University Endowment Investors in Hedge Funds.