[REPLAY] - Ashby Monk – Asset Giant Futurist (Capital Allocators, EP.29)

By being the first clients for "invest-tech" and alternative data companies, hedge funds are training technologists to identify market inefficiencies. This process will ultimately commoditize their unique edge and lead to their disruption.

Exposing the enormous fees paid to external managers forces asset owner boards to ask, "Is there another way?" This transparency is the key driver that prompts them to consider the strategic benefits of building internal investment teams.

This academic field builds economic theory from case studies, interviews, and data. It avoids the flawed, abstract assumptions of "rational actors" and "efficient markets" that are common in traditional top-down economic models.

A novel model uses philanthropic capital to fund an "aligned intermediary" that sources no-fee climate deals for pension funds. This is more effective than funding research, as it directly solves the pensions' access problem and deploys capital.

Ashby Monk argues the US retirement system fails by offloading complex financial decisions onto individuals without adequate guidance, akin to expecting a patient to become their own doctor using a flawed online tool.

The highly successful NZ Superfund derives its value from a few large, high-conviction strategic bets where it has a unique edge, rejecting the conventional wisdom of broad global diversification for large asset owners.

Passive fintech models appeal to optimizers but fail with the majority who are stressed by money. A better approach is active engagement through gamification ("educate through doing") rather than pushing financial literacy that research shows doesn't work.

The key question for institutions isn't "how do we access the best managers?" but "what is unique about us that facilitates privileged access to assets or managers?" This shifts the focus from picking to leveraging inherent advantages.

A proposed university fund model involves automatically exercising pro-rata rights in its startups only after a top-tier VC firm leads a round, effectively creating a top-decile portfolio by leveraging external due diligence at near-zero cost.