For endowments, compounding capital is key. A lower multiple returned quickly allows for redeployment, potentially generating a higher total return over the long term than a high-multiple fund that holds assets for 15-18 years.
A return multiple is meaningless without its time horizon. A 5x return over 30 years is poor, while a 5x return in 5 months is exceptional. This rule forces a focus on the velocity and true performance of capital.
Unlike LPs who passively delegate to fund managers, Baylor's CIO actively analyzes market psychology and makes allocation decisions, such as increasing investment in software during the 2026 downturn based on human behavior insights.
To remove emotion from investing in volatile markets, Baylor employs a mechanical strategy. They allocate capital in fixed increments as the market drops by certain percentage points, ensuring they never go "all in" at a single price point.
An LP's portfolio is a carefully constructed system. A manager who deviates from their stated strategy—their "position on the field"—disrupts the entire asset allocation model. This breach of trust is a fireable offense, regardless of short-term returns.
To ensure winning investments materially impact the endowment, Baylor reverses the typical allocation logic. It decides on a target dollar amount per underlying company (e.g., $3 million) and sizes its fund commitment accordingly, based on the fund's expected number of investments.
While power and land were historical constraints for data centers, the new key hurdle is obtaining local permits. Citizen opposition to rising power and water prices is causing permitting boards to reject projects, creating scarcity and increasing the value of already-permitted sites.
Private credit investments often have exposure to companies that behave like equity during downturns. However, they lack the significant upside potential of an equity position. Baylor's CIO believes this creates a poor risk-reward trade-off and prefers direct equity exposure instead.
Baylor's largest private allocation is in growth equity. The strategy's key appeal is mathematical: with fewer companies going to zero, the fund's overall returns aren't dragged down by total losses. This creates a more reliable path to high returns compared to the hit-driven nature of early-stage venture.