E424: 32-Year Notre Dame CIO on Sequoia, Venture Capital & Concentration

Episode Summary

Executive Summary: Scott Cummings reflects on 32 years as Notre Dame’s CIO, arguing that long-term investing success comes from culture, values, alignment, and people selection more than tactics. He stresses disciplined partnerships, small/nimble managers, transparency, and trust, then applies those lessons at Grafton Street Partners, where he runs a concentrated public-private equity strategy with former students and trusted relationships.

Main Topics: Alignment, governance, and Notre Dame’s institutional advantage (Priority: 5/5): Cummings says Notre Dame’s board, administration, faculty, students, alumni, and investment committee shared a rare alignment of purpose and values, which made long-term investing easier and removed governance friction. Investing as a people business (Priority: 5/5): He repeatedly emphasizes that manager selection is about people, culture, transparency, humility, and consistency. Strong GPs communicate clearly, admit mistakes, and demonstrate enduring values across cycles. Disciplined AUM growth and the danger of scale (Priority: 5/5): Cummings argues many firms become too large for their strategy, chase fees, and lose alignment. He prefers firms that stay small, grow selectively, and preserve performance through capacity discipline. Venture, innovation, and contrarian thinking (Priority: 4/5): He describes investing in the right side of major technology cycles through venture partners, noting that the best managers are independent thinkers who can spot emerging trends before consensus. LP-GP partnership, trust, and fair terms (Priority: 4/5): The discussion covers how LPs and GPs can be better partners: understanding each other’s constraints, offering fair economics, not over-optimizing terms, and building long-term relationships over transactional behavior. Building Grafton Street Partners (Priority: 4/5): After Notre Dame, Cummings launched Grafton as a smaller, equity-focused, public-private compounding vehicle for family offices, leveraging long relationships and former students as investment partners. Risk, liquidity, and lessons from crises (Priority: 4/5): He notes that early in his career he focused too much on returns and not enough on risk, learning from the dot-com bubble and global financial crisis to prioritize liquidity and downside protection.

Key Arguments: Long-term alignment among board, management, and investment committee makes almost anything possible in institutional investing. The best investment managers are transparent about what they do well, what they don’t, and the mistakes they’ve made. Manager selection is fundamentally about people, culture, and consistency of leadership across generations. Firms that grow assets too aggressively often damage performance by becoming too fee-dependent and too broad for their strategy. Great investors are often contrarian, but the key is truly independent thinking rather than fashionable “contrarian” positioning. LPs should understand GPs’ operational burdens, while GPs should respect LPs’ governance, liquidity, and spending constraints. Smaller size can be an advantage in venture and small-cap/public equities because it preserves agility and discipline. A fair partnership can be better than fee minimization; premium carry or capacity rights can align interests when managers are exceptional. The most durable competitive advantage in firms is culture and values, especially across multiple generations. Liquidity policy and risk controls matter as much as return generation for spending institutions like endowments.

Data Points: Years as CIO at Notre Dame: 32 years - Cummings served as CIO for Notre Dame for more than three decades. Age when appointed CIO: 26 - He was unusually young when hired as CIO in 1988. Notre Dame endowment when he started: $400 million - He describes the endowment size at the beginning of his tenure. Notre Dame endowment today: Over $20 billion - He cites the endowment’s growth over his career. Venture exposure through partners: Close to 35% of the NASDAQ Stock Exchange - He claims Notre Dame’s venture relationships gave exposure to a large portion of future NASDAQ winners. Investment firms reviewed in career: Couple thousand - He estimates the number of firms he met over his career. Managers hired/fired: Over 400 - He quantifies the number of GPs selected and later exited. Typical annual manager interviews: 500 to 600 firms - He says the team often interviewed hundreds of firms per year. Notre Dame spending from endowment in early career: Under 10% of total budget; probably around 5% - He contrasts early endowment dependence with today’s larger reliance on endowment spending. Current spending share of budget: Close to 40% (mid-30s at least) - He notes endowment spending now makes up a much larger portion of the university budget. Student debt today at Notre Dame: Average student less than 10% of cost as debt; often below 5% - He highlights major progress in financial aid. Fiscal 2000 return: About 62% - He cites a very strong year during the telecom bubble. Subsequent two years after fiscal 2000: Down 7% and then 6–8% - He uses this as a lesson on volatility and risk management. Grafton Street AUM: About $1.3 billion - He says the new firm has grown to roughly this size. Grafton performance since launch: Almost doubled money / roughly 20% combined return - He describes strong early results over about four to four and a half years. Grafton portfolio mix: About 60% private, 40% public - He outlines the firm’s long-equity structure. Private markets fundraising growth: From a few billion globally in the late 1980s to hundreds of billions annually - He contrasts then vs. now in private equity fundraising. Target carry structure example: 20% stepping to 30% or higher above 4–5x returns - He describes how he preferred premium carry structures for excellence.

Pivotal Quotes: "anything is possible when you have that kind of commitment and alignment on any investment approach" — Scott Cummings: He explains the key lesson from Notre Dame’s governance and shared purpose. "investing is ultimately a people business" — Scott Cummings: He frames the core of manager selection and firm quality. "The best bluff is no bluff" — Scott Cummings: He summarizes why transparency and authentic culture matter in GP meetings.

Implications: For investors, the lesson is to prioritize culture, alignment, and manager quality over scale or fee minimization. For firms, durable outperformance depends on trust, discipline, and staying within strategy limits.