Alisa Mall:

I knew a lot about portfolio management. I knew a lot about portfolio construction. I knew a lot about manager selection and I was deep in certain asset classes. And what I have proven to be good at in my career, which I think is one of my better skills, is I'm resourceful and I am not embarrassed about what I don't know. I'm not afraid to say I don't know things. And I knew I could find people to help me and find the right experts and find the people that did know the things I didn't. And that's basically what I've done.

Nancy Lashine:

Hello, and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Capital is a lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What can we learn from their experiences? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more.

Our guest on today's episode is Alisa Mall, CIO of DFO Management. DFO, previously known as MSD Capital, was established to manage the assets of Michael Dell and his family. Alisa joined DFO in 2022 with a mandate to manage and diversify Michael Dell's tech-heavy investment portfolio. Alisa is an extraordinary human, open, generous, and uber smart. She has over two decades of real estate and broader investment experience as a lawyer, as an investment manager, and as an allocator.

Immediately prior to joining DFO, Alisa was a managing director of corporate strategy at the biotechnology firm, Foresite Capital, where her responsibilities included corporate development, long-term strategy, investor relations, and human resources. She spent 11 years at Carnegie Endowment where she managed the firm's real estate and natural resources portfolio. And prior to joining Carnegie, Alisa was a director in the equity capital markets group at Tishman Speyer, helping to market real estate funds to institutional investors.

Early in her career, Alisa was a real estate attorney and also had a stint at a technology startup. We talk about Alisa's career, her investment philosophy, DFO's current capital allocation, their role of real estate, and the use of technology and so much more.

I'm so excited, Alisa. First of all, thank you for agreeing to do this. I think it's taken me about four years to convince you, so I appreciate that. It's been a really interesting four years for you, and I think probably it's a great time to take stock, look back, and talk a little bit about where you are and where you've been. I feel like I've known you since you moved to New York.

Alisa Mall:

You have.

Nancy Lashine:

I remember sitting at the Standard Hotel and just sitting there going, "Alisa, you're going to do whatever you choose to do." I was just so excited for you. And wow, you've just had such an interesting career path because you've gone from being a lawyer at a law firm to real estate marketing of investment products, to working in an endowment on the buy side to something in the biotech industry, which you'll have to explain to us, and now, obviously, running the Dell Family Office, which I think is known as DFO, which is an incredible job.

So I don't know too many people as young as you, who've had such an interesting and varied career and been able to walk to a goal without circumnavigating that straight line, but rather in a really interesting pattern. And I'd love to talk with you a little bit about how you made all those decisions and something about the blend of bravery and fear as a motivator. So welcome, so happy to have you.

Alisa Mall:

Thank you. Well, again, I'm thrilled to be here. We met over the holidays in 2006. I had moved to New York the first week of September of 2006, and I was a lawyer. I was a real estate lawyer, and you were just launching Park Madison, and we talked about me coming to work for you if you remember.

Nancy Lashine:

I do.

Alisa Mall:

But it was so early, you were in pure startup mode. And while I have taken a lot of risks in my career, which we'll get into, that felt like too big of a risk at the time because I had just moved here, so many changes. So I wanted to work for someplace established. But I've known you since then. You've been a mentor and a friend and somebody I've always admired and looked up to. And I'm just grateful for this opportunity and grateful for your friendship. You've given me a lot of guidance over the years.

Nancy Lashine:

Well, I'm sure you'll feel this way at some point if you don't already, but I feel like it's a privilege to have you ask me questions and give you whatever little knowledge I can because you're a superstar.

Alisa Mall:

Well, I feel the privilege is mine.

Nancy Lashine:

Let's talk about what you've learned along the way. So you were a corporate lawyer. Why did you decide to go into real estate at all and tell us about that journey?

Alisa Mall:

So actually before I was a corporate lawyer, I worked for an enterprise software company, which a lot of people don't know, and it was in Austin, Texas. So I went to Yale undergrad and I graduated in 1999, which is really the peak of the tech world. All of my friends and classmates were interviewing for banking and consulting, and that is sort of what you did at that time. I was in those processes too and this really cool tech company came to campus and they had a resume drop where if your resume was selected, you and five friends got to go to Steamboat.

And so I of course dropped my resume as did the entire class. I flew down to Austin for my final round interviews and I was just blown away. It felt like a big risk because really all of my classmates were going to Wall Street. But I thought, this is this moment in technology where the world was really changing. We'd only had email for a couple of years. The internet was pretty nascent. And I thought, "This is really cool." I knew I wanted to go to law school, I'd already taken the LSAT, but I decided to go for it.

So I picked up and moved to Austin, which now is a very full circle moment because Dell is based right outside of Austin and Michael Dell and his family live there. And when I moved there, Dell was the hottest company around, and I was very aware of it. So there's sort of a nice full circle thing. But after I did that, I did indeed go back to law school and my long-term goal was I was like, "I want to be on the Supreme Court." I'd read The Brethren by Bob Woodward and I thought, "Oh, I mean, that's what I want to do."

One, I had no appreciation for how insanely ambitious and hard of a goal that is to achieve. And two, I didn't really know anything about anything. So when I was in law school, I did clerk for a federal judge in the Northern District, and I did not like it at all. And it was sort of devastating to me because that was my life's dream and it crushed it and I realized I needed to pivot. So I thought, "Well, then I need to go for work for a law firm if I don't want to do litigation and do another clerkship."

But I kind of looked at the gamut of law, and a lot of it seemed very esoteric, but my two highest grades in law school were income tax and property. And I thought, "Okay, well, maybe I should look at real estate." I didn't even know what that meant, but I thought, "Well, I can see a building, I understand it." And at the time, I went to Stanford for law school, there was a firm in San Francisco that had a big real estate practice and they were recruiting.

And so I ended up going to Orrick, Herrington, which was an amazing experience. It was my first real introduction to real estate. Actually, one of the first projects I worked on because I grew up in a town called Tiburon in Marin County outside of San Francisco, there was essentially one man who owned almost all of downtown Tiburon. He passed away and in his will, he gave all of these properties to his wife and his sister who did not like each other. And so we had to do a division of assets. I was the only associate on it, and we actually used Monopoly houses to lay out the town. And this was my hometown, which is a small town.

So it was just a really incredible experience. And in that time, I learned so much. I met so many people who today I still know, people for whom I worked who are now big people in the real estate industry and I was the junior associate. It was a fairly small group and the associates above me, three of them went out on maternity leave, which was like a baptism by fire. So it was just me.

Nancy Lashine:

What are the chances?

Alisa Mall:

It was like just me. And so I learned a ton and I really enjoyed it. I loved the partners for whom I worked, but in that role I thought, "Wait, I want to be on the other side of the phone. I want to be the person calling at 5:00 PM on Friday saying I need this, not the person answering the call and having my weekend be destroyed."

And as my skills started to develop, one of the things I thought I was really good at was engaging with the clients. And they did all really like me, and I'm still close with many of them today. And I decided when I looked forward at the life of a partner at a law firm, that wasn't exciting to me. So I had some incredible mentors to whom I'm very grateful and I, after a couple of years, told them I wanted to move to New York. I'm from San Francisco, but I saw it for a number of reasons, more personal, which was I had just ended a relationship and I felt like I had-

Nancy Lashine:

You needed leave town.

Alisa Mall:

I needed to leave town. And this is a podcast so you can't see me, but you know this, Nancy, I'm 6'1" and I'm Jewish. It was really important to me to find a Jewish guy and I had tapped out the San Francisco market. And so my thought-

Nancy Lashine:

Wait, the tall Jewish guys in San Francisco.

Alisa Mall:

Exactly. Right.

Nancy Lashine:

Because that's a specific order.

Alisa Mall:

That is exactly right. So I thought, "I'm going to move to New York for a year. I'm going to find a tall Jewish guy and we'll move home." And I went to the partners at Orrick and they were amazing. They said, "You can work from our New York office. You'll take the New York bar. It's no big deal." And they said, "We'll pay for your move. We need more associates in New York." And I said, "I don't want you to pay for my move because I don't know that I want to stay." And they were incredible, they said, "Okay, well, go. You pay for your own move, but figure it out. Stay as long as you want. We love you, and if you decide you want to leave, we support you."

So I moved and I was working for Orrick. I went to a party actually out at the beach, and I was chatting with this guy and he said, "What do you?" I said, "Oh, I work in real estate." He said, "Me too." And I said, "Who do you work for?" And he said, "Tishman Speyer." And I said, "Oh, I see Tishman's buildings in San Francisco all the time. I just moved here." He said, "Oh, well, you should get in touch." I said, "Great. How do I get your contact info?" He said, you can get it from your friend who brought me to the party. So two days later, I said to my friend, "Can I get that guy, Rob's contact info?"

Nancy Lashine:

It was Rob Speyer?

Alisa Mall:

We had our Blackberries. We were sitting across from each other, he said to me, "That was Rob Speyer." And I was super embarrassed because I didn't know. And so I sent Rob a note and I said, sheepishly, but I said, "I would love to come meet you." I came into the office and I'm still at Orrick, and we spent probably 45 minutes together. And he did something really incredible for me, and I had saw Rob recently and talked about this with him. One, he made a number of introductions to me to a couple of big real estate families and to John Mechanic at Fried Frank who offered to second me. And he said, "Why don't you go meet all the groups at Tishman and figure out if something interests you?"

It was a real sliding doors moment in my career because what I thought was the most interesting was acquisitions or leasing, but I did not have the confidence or the courage, and I don't know if I want to say I didn't think I had what it took to do it, but I definitely didn't feel like I could step into that role. I was too intimidated. And so I met with all the groups and I said, "Well, I could do equity capital markets. I can do some legal work. I can write PPMs and I can talk to investors. I've been a lawyer, I've been talking to clients."

So Rob said, okay, which was an incredible gift and generous. And I think about, I mean, he really altered the course of my life. So I joined Tishman. My first week was January 2nd of 2007, which is a really interesting time in real estate markets. It was a wild place to work. They were doing a number of huge transactions.

Nancy Lashine:

Right. A lot of global.

Alisa Mall:

A lot of global, Brazil, China, India, CARR America portfolio in D.C., StuyTown, Archstone-Smith. It was a wild time. It was a very steep learning curve. I constantly felt overwhelmed and kind of terrified, spent a lot of time in the bathroom crying.

Nancy Lashine:

No way. Really?

Alisa Mall:

Yes, I just felt way over my skis, which I also felt as a lawyer.

Nancy Lashine:

Alisa, just for people who don't know you, I mean, you are 6'1", you're beautiful. You walk in a room, you have a commanding presence, and you're extremely articulate. You portray a huge amount of confidence, so it's really kind of shocking to think that behind the scenes, you've got to work at it. And I think that's a great lesson for so many people listening. What you see is not always what is real.

Alisa Mall:

So I used to go home every day late because we worked really late, and I would call my parents sobbing, "Can't do it. It's so hard. I don't know anything." And my father, who is just a huge influence in my life, after about probably three weeks, maybe four weeks of this, my father who was in the Vietnam War said to me, "Alisa, this is not Vietnam. Either quit, get your shit together. I'm not going to take these phone calls every night." And it was like a real perspective wake up call.

Nancy Lashine:

Was it a tough love kind of-

Alisa Mall:

Yes, it was. And I was upset and sort of angry that he said it, but I also, it has always stayed in my mind. Every time something is really hard for me and I feel like I'm freaking out, it has been a good mantra in my head of this is not Vietnam. We are privileged to have these jobs, all these corporate jobs. We are not in the trenches somewhere. And if something is making you unhappy, I've always felt like it's incumbent upon me to either change my attitude or change my surroundings.

Nancy Lashine:

Yeah, I think about that all the time. Literally yesterday morning, I got up and whatever, the subway was kind of gritty. And I was reading the paper all weekend about what's going on in Syria and the incredible devastation, and I thought, "Can you imagine being born in the last two years, somewhere in that part of the world. Whether you were born in Gaza or Israel or Syria, it doesn't matter, it's just been so ..." We are so privileged.

Alisa Mall:

We are so privileged. And I'm sure we'll talk about this, I'm fast-forwarding here, but I'm a working mother. I have two girls who are 9 and 11, and I'm gone a lot for work. I travel a lot, I work long hours and sometimes it's really hard for them. And one of the things I say to them all the time is it is a real privilege to be able to work and to have a career like I have. There are lots of places in the world where women do not have that opportunity. And so you may not appreciate it now when I'm gone, but you'll remember we are lucky to have these opportunities, because as you said, there are so many places where people don't.

So in any event, I was at Tishman and really learning a lot, and it was a very formative time. It was a buildup to the financial crisis. And I didn't know a lot, but I knew that things felt out of control. Everything felt out of control.

Nancy Lashine:

Right.

Alisa Mall:

And I didn't know if that was just me. I mean, I was young, I was-

Nancy Lashine:

Well, you didn't have perspective.

Alisa Mall:

I didn't have perspective.

Nancy Lashine:

We used to laugh about, we called it the centrifugal force of all the deals going on, and people were just running so fast and the centrifugal force just kept everybody going.

Alisa Mall:

It was insane.

Nancy Lashine:

Till it stopped.

Alisa Mall:

And it felt insane to me. It felt like a mania. I didn't have perspective, but I had that pit in my stomach all the time. And it was in that role where, I mean, when I got to Tishman Speyer, I didn't even know what an IRR was. I had to have friends really teach me. I took real estate finance classes at night at NYU. I really did not know anything. And in that time there, I interacted with a lot of investors, and that was really the first time I learned about this LP allocator investor role. And I thought, "How do I get to that job?" I want to be on that side of the table in the same way that when I was an attorney, I thought, "Oh wait, I want to be in the client's shoes." Sitting on the GP side, I thought, "Oh, I want to be an LP."

I met a number of investors and I worked really hard at networking and cultivating relationships. And I became close friends with somebody named Niles Bryant, who is now the chief investment officer at Bowdoin College. But at the time, he ran real assets for the Carnegie Corporation of New York, which is Andrew Carnegie's private grant-making foundation, and actually the oldest private grant-making foundation in the country. He called me one day and said, "I'm leaving. I'm going to a foundation. I'm going to the Gordon Betty Moore Foundation. Would you be interested in interviewing for my job?" And I was like, "Yes."

And at the time, Carnegie was run by a woman named Ellen Shuman who had run Yale's real estate at the Yale Endowment for 16 years prior to coming to Carnegie in 1998. So we kind of spoke the same language, and Ellen had a philosophy of you hire smart people and even if they don't have experience, they'll figure it out. So she also, in the same way that Rob did, took a huge chance on me. I mean, I remember interviewing and she was showing me these distribution versus capital call charts, and she was like, "This should be self-funding." It was this up and down chart and I remember looking at it thinking, "I have no idea what she's talking about, but I'm just going to ask a lot of questions."

The job was to oversee the real estate allocation for the foundation as well as all of the real assets. So part of the mandate was to build out a natural resources portfolio, which they didn't have much of. I knew nothing about natural resources. I've said this to other people, but I thought oil and gas was like, you go to the gas station and fill up your car. I didn't know anything about-

Nancy Lashine:

Oh, it's not?

Alisa Mall:

I mean, I knew nothing. Carnegie went into a hiring freeze because of the financial crisis. It was such a draconian time for all of these foundations and endowments that had over allocated to privates. And then the denominators dropped dramatically, so they were all sort of frozen. So they went into this multi-month hiring freeze and ultimately lifted the freeze. And I started there in March of 2009, which was a wild time because-

Nancy Lashine:

Well, it was a good time to leave Tishman, actually.

Alisa Mall:

It's a great time to leave Tishman.

Nancy Lashine:

Yeah.

Alisa Mall:

And from a learning perspective, it was an unbelievable time to join Carnegie because it was really where I learned about the importance of liquidity, the importance of not over allocating to privates, the perils of too much leverage. We had a lot of GPs in the portfolio that had portfolios that were cross [inaudible 00:20:56] and we saw them lose assets. We had to sell interests on the secondary market at meaningful discounts to NAVs at already reduced NAVs. It was an incredible education about how to think about portfolio construction, particularly for a fixed pool of capital. Ellen was an incredible mentor. She gave me very long rope to hang myself with. I learned a ton about oil and gas, and I spent almost the next 12 years there.

So the first half was, or more than the first half, primarily focused on real assets. We had a CIO transition. Meredith Jenkins, who's now the CIO at Trinity Wall Street, and Kim Lew who now runs Columbia's endowment took over as co-CIOs. Meredith subsequently left, and it was just Kim. But over that time, Carnegie was a closed system, which meant that it was founded from a $100 million stock grant from Andrew Carnegie in 1911, and they never received another incoming cash flow. All of the growth was organic.

And so once you have a fixed portfolio with no incoming cash flows, if you have a lot of private investments, there's not that much to do once you're fully invested. So to keep myself and the team interested, they gave us a lot of other opportunities to grow. So I led our emerging manager program, which was super exciting. I got to learn a lot about hedge funds, a little bit about buyouts and broaden my skill set.

And it was when I think about a period of time, those 11 years, the three women that I reported to were all exceptional mentors. And in terms of a lesson, when I look back at my career, I've never had a grand master plan. I never thought I'd be in this seat. I always took jobs based on the person that I was going to be working for and what I thought I could learn from them.

And from Kim, Meredith, and Ellen, I'm forever grateful. They're all dear friends today. I had my children during the time there, they were incredibly supportive. Watching Kim and Meredith, I really learned and saw from the best how to be a working mom and how to balance those competing priorities and integrate your life. I learned so much about portfolio management, about manager selection, about really the craft of allocating.

Nancy Lashine:

But ambitious Alisa is thinking, "What's next?" And I remember you thinking, did you want the CIO job? Would that be something that would be interesting to you? And obviously when you deal in real estate, primarily in alternatives, it's maybe 10 or 20% of the portfolio. So to use your thought process, it's somewhat intimidating to think about running the rest of the portfolio, which is equity and cash and fixed income, which is maybe not something you'd had hands-on experience with.

Alisa Mall:

That's right.

Nancy Lashine:

So how did you get from there to where you are today at DFO?

Alisa Mall:

So I really struggled with whether I wanted to be a CIO or not for all those reasons. I love investing, but I would not describe myself as a student of the markets. I don't wake up in the morning thinking about what the central banks are doing. I don't think about what the Fed is doing all the time. It's just not in my constitution. So I really struggled for a long time of do I want to be a CIO. I was in a number of searches, I was a runner-up for a few. And the feedback on my experience was always like, "You have too much real assets experience and not enough equities and fixed income, which are the bulk of most institutional portfolios."

So in 2020, we were living in Los Angeles with my family during COVID, and I got a phone call from a real estate GP, actually Stu Shiff from DivcoWest, who's been a long-time friend and I met when I was at Orrick. He was a client. And he said, "I think you should talk to my friend, Jim Tananbaum, who runs Foresite Capital, which is a life sciences biotech firm." And I had met Jim, he had come to pitch Carnegie and I said, "Talk to him about what?" And he said, "Look, he wants to bring on a partner and I think you're the right person." And I said, "I don't know anything about life sciences and I don't want to do fund marketing, especially about a topic I don't really know." And Stu said, "I think you should just go meet with them."

So Jim was living in LA also. I went to go meet with them outdoors, six feet apart. We spent over the course of a week, I don't know, like 12, 14 hours together. And he met my family. We spent a ton of time together and Jim is a real visionary. And it was deep COVID, so biotech was where it was at. The vaccines were not out yet. Everybody was focused on the innovation in that sector. He made me a job offer and I struggled a lot. I was really excited about the opportunity to learn something totally new, but it was a complete week, I mean, I took high school biology. That is the beginning and the end of my science experience.

And I called a number of my friends and mentors, including Kim Lew. Kim was still at Carnegie at the time, but I said, "Should I do this?" She said, "You sound super excited. Sounds like a great opportunity. If you hate it, you always have a job with me. And if you love it, amazing." And again, of back to the Rob Speyer life-changing moment, it was such a gift. It was like a parachute. She really gave me the courage and the freedom to try something and see if I liked it.

So I made the leap, again, it was a huge leap. It was really interesting. I knew going from the LP back to the GP side that people would treat me differently maybe. What was surprising to me in that was most of my friends who were GPs treated me the same. They stayed in touch, they wanted to get together when they came to town. And those were the relationships that one would always be sort of suspect of. It was other LPs, not the ones that I was really close to, but the ones that were one layer out that were much less friendly immediately.

Nancy Lashine:

What did that teach you?

Alisa Mall:

It taught me that you really have to understand who your real friends are. And my husband has always said this in allocator roles. He's always been like, "You're great, but just remember, everybody's got an ulterior motive and you just have to understand what's driving people's interest in you." And it just made me a lot more careful about who I spend my time with, who I really open up to. It was actually sad for me.

But I learned so much at that time at Foresite. It was a fascinating period in that sector. But I also learned pretty quickly that biotech is highly technical and the people that thrive there at the very least are pre-med, if not MDs or PhDs. And Foresite had 45 PhD MDs. And I really felt that I didn't have the tenacity to dig in and really learn this stuff. I mean, I was reading all these books, but I realized it was interesting, but not interesting enough for me to do that.

And so I called Kim in December of '21 and I said, "Put me in your budget." It was, sorry, January of '22. I said, "Put me in your budget for January '23." She had subsequently moved to Columbia to be the CEO and CIO of Columbia's investment management company. And she said, "Okay." And then shortly thereafter, my dear friend, Coby Packard, who I know you also know who I had gone to college with, but we actually weren't friends in college, but we've known each other a long time. And we stayed in touch because he was at Lehman and then Apollo and we would connect a couple times a year. He would tell me what was going on in his business.

He called me up one day and said he had moved to MSD. He said, would you be interested in being an advisor to our business on his team, which is the real estate team? And I said, "Well, let's get together and talk about it." And over the course of a series of conversations this evolved. And what was MSD at the time knew that they had to break out the family office, which was MSD Capital from MSD Partners, the asset manager, and separate them. And so over a multi-month conversation and series of interviews with Coby and Gregg Lemkau and Michael Dell, this role evolved. And I was hired in the summer of 2022 to break out MSD Capital and stand up DFO Management, the Dell Family Office. We underwrite the portfolio, build a new team, new systems, new processes, and create something new.

Nancy Lashine:

That's ridiculous. I mean, that's a huge something. So how did you feel brave enough to take that leap?

Alisa Mall:

I was scared, and it's also a significant asset base. It was a big step from Carnegie. I felt confident in what I had learned during my tenure at Carnegie about portfolio management and portfolio construction. And I had really learned from some of the best in the industry, but I didn't appreciate really what I was stepping into. I don't know if I would've had the confidence really if I understood everything. But the thing that I've always tried to think about, and I tell younger women this all the time, nobody really knows how to do a new job that they're taking, right? If you haven't done that exact job in that exact place, you don't know.

And so I figured I knew a lot about portfolio management. I knew a lot about portfolio construction. I knew a lot about manager selection and I was deep in certain asset classes. And what I have proven to be good at in my career, which I think is one of my better skills, is I'm resourceful and I am not embarrassed about what I don't know. I'm not afraid to say I don't know things. And I knew I could find people to help me and find the right experts and find the people that didn't know the things I didn't. And that's basically what I've done.

Nancy Lashine:

So Dell Family Office has two constituencies, and correct me if I'm wrong, the foundation and the family?

Alisa Mall:

Yep.

Nancy Lashine:

And so you're essentially managing, do you think about it as one portfolio or two portfolios?

Alisa Mall:

I think about it as three portfolios. So there's a Michael and Susan Dell Foundation, there's a series of trusts that we group together, and then the family. And so they're all different. The foundation is the most different. It's tax-exempt, obviously. And tax efficiency is a huge, huge criteria for the taxable pools, which was never something I had experience with. So that has been a very steep education and I've gotten religion on tax efficiency-

Nancy Lashine:

Does religion mean you generally try hard not to pay taxes?

Alisa Mall:

I do everything I can, and our team does everything we can to be mindful of tax consequences. And if we are investing on behalf of the taxable pools to identify investments that are very tax efficient and do not create unnecessary ordinary income, which when you work for a nonprofit, you don't ever have to think about.

Nancy Lashine:

Right. Right. It's a big distinction.

Alisa Mall:

It's a big distinction.

Nancy Lashine:

So what are some of the challenges that you face when you first started at DFO that you were like, "Wow, I just never even thought about that before."

Alisa Mall:

The biggest challenge day one was inheriting a 25-year-old legacy portfolio with a lot of complexity without a real big team to really help me learn and understand a lot of direct investments. It's hard to digest and study and learn all those things. It was really like trying to absorb, understand, and just get smart about what was in the portfolio. That was a huge challenge. Understanding the systems and reporting, that was a huge challenge. All new systems and technology, a lot of which we've evolved since I've been here. Revamping reporting, it was just a big thorny complicated portfolio. So just learning all that was really overwhelming.

Nancy Lashine:

Sounds like joining the CIA.

Alisa Mall:

It felt like that. I mean, sometimes it feels like that and there's a level of discretion that I didn't have to think about before.

Nancy Lashine:

So how do you think today about asset allocation and how has that evolved since the time that you were at Carnegie, just in terms of not necessarily for an endowment versus a family, but just how has the world of asset allocation evolved?

Alisa Mall:

I think you've seen a fair amount of innovation in the world of asset allocation at the institutional level, and we've tried to adopt the best of that. So historically, you've always had a strategic asset allocation bucketed by asset class for which you used capital market assumptions. You do all these Monte Carlo simulations and you'd come out with what your target return and risk tolerance were. And that would be how you created a top-down framework.

What we have tried to do is take a step back and follow more what GIC and CPP have really innovated, which is this total portfolio approach, which is more just a different language or different semantics around asset allocation, but thinking much more about drivers of risk and return. And my friend, Amy Diamond at USC was really the first one who got me thinking about it this way.

You have equities and everything else, so you can put things in their buckets. You can call something growth equity and venture capital, but it's still equity and it's still in theory driven by the same factors as buyouts and public equity. And so thinking more holistically about the portfolio rather than these buckets is something we've tried to do. And we have an even bigger challenge, I think, which is significant percentage of assets here are two very significant single stock names. And so thinking about how those behave and then what you need in the rest of the portfolio to act as a ballast to that, which creates a very different asset allocation than you would have at most institutions.

Nancy Lashine:

But go back, I'm interested in this change and in thinking about asset allocation, you mentioned GIC and CPPIB, two of the largest global investors. I guess we all learned there's equity and then there's fixed income, and one is about managing growth and the other is about managing risk. So how does that factor into your thinking?

Alisa Mall:

So we call it equity and diversifiers. As opposed to, oh, you're the buyout expert, you're the venture expert, you're the real estate person, we've bucketed the world into those two much larger buckets. The greatest implications of that are among the team and among resources and how people are thinking about relative value and risk return across the portfolio as opposed to in their particular area or their silo of expertise.

And that has been hard to do from just a human capital perspective because people really like their sectors and their industries. They have networks, they have expertise, they have a lot of relationships, pattern recognition. But really pushing to say, "Okay, I know you love this real estate manager, but let's think about what's driving the exposure and is this the best wrapper to access that? Would we be better off in an adjacent asset class or a different type of investment to get that same risk return?" And it's just much more of a focus on relative value.

Nancy Lashine:

So the endowment and foundation world have always been very clear that manager selection is a key driver of return, certainly in privates. How does this change in your thinking? I mean, so when you think about trying to be more holistic and looking at things, does that lead you more towards indexing and less focused on manager selection?

Alisa Mall:

We still pay a lot of attention to manager selection because I do think it really matters. And for real alpha and privates, I think it matters a lot. But on the marketable assets, we are way more focused on passive low-cost indices. One, particularly for the taxable capital. They're way more tax efficient, and it is really hard to see real alpha particularly in long-only equities. So that is our focus there and it's a big shift. We don't have a lot of hedge fund exposure, which is more market neutral.

But the way we really think about everything, and this comes really from Michael, is we view our opportunity costs as cash and the S&P 500. So we think about everything in relation to those two goalposts. So if it's an alternative asset where you're looking for a lot of alpha, it better give the S&P a real run for its money, otherwise, we should just be in a low-cost index product. And if it's something that has a diversifying component, you better get a really nice spread to cash, at least where cash has been the last couple of years. That obviously will change as rates come down.

But to take either the illiquidity or the risk in other types of either credit or real estate or what we call opportunistic, it has to make sense if you're in an environment where at least for the last couple of years we were earning five plus percent on our cash. So we think about everything in that construct on a relative value basis. And the benchmarking that we do, which I think is different from most institutional investors is everything is against those two things.

Nancy Lashine:

Are you just thinking about everything as dollar denominated? Do you think especially post-election, when people are more worried about inflation, of course crypto has gone through the roof, are you thinking about hedging the dollar risk or you just don't worry about that?

Alisa Mall:

We're not worried about it. We have a long duration. I'm lucky that the principal that we all at DFO work for understands volatility, understands risks. It's an ongoing dialogue with him. Michael Dell is in the markets every day, both through Dell Technologies where he's the CEO and he's a student of the markets. He loves investing. So we talk about this stuff all the time, but we're not hedging currency.

In contrast to a foundation or an endowment or a pension, we're not funding an operating budget. We don't have liability matching other than what our committed capital is. The foundation needs funding to pay out, but we're in the fortunate position of having ample cash that we're not in a position where we have to obsess about that. So we don't worry a lot about currency.

Nancy Lashine:

The podcast is called Real Estate Capital. So I have to ask you, how are you thinking about investing in real estate? Why would you invest in it today? What do you find interesting?

Alisa Mall:

We love real estate as I think many high net worth people do. It's very tax efficient, it's long duration, you can have real compounding of capital. So all of those qualities we love. And then for the foundation, cash flow is great for those property types. Most of our real estate portfolio is legacy, and those are all very hard to replace assets in great locations. A lot of it is high-end hospitality that's sort of irreplaceable that you can hold for a really long time.

We just made a significant commitment to industrial, one, to get a little bit of diversification, and two, even though industrial has seen a big run, we continue to like those tailwinds and think there's still a lot more room to go. The one area where we, I'm not going to say contrarian because it's not a market fact, but where I think we're different from most is we have not looked at data centers. We've looked at them, but we do not have any data center exposure in large part because it is a first order derivative of Dell. And so Dell is right at the center of everything happening in AI innovation and all of the compute required for that. And so we have a lot of Dell and feel like data centers is too correlated.

Nancy Lashine:

Right. Right. No, that makes sense. And when you're doing real estate today, are you doing it in funds or directs or both? How are you thinking about it?

Alisa Mall:

We have a number of large partnerships, including with what is now BDT and MSD and Coby Packard and his team as well as other partners. And really our MO has been relying heavily on third parties where then we can get a lot of access to co-invest or joint ventures. We have a lot of flexibility. We have the capability to do a lot of things. It is a lot. We have a lean team by design and Michael wants it lean and I want it lean. And so we lean heavily into a handful of big strategic partners to help us.

Nancy Lashine:

I'm curious how your view of the private alternative markets has evolved from the time that you were at Carnegie to now. Because sometimes I think when you're an investor where you're making 20 or $50 million commitments, and by definition you have to invest with managers and you have to invest in funds, and your gross to net spread is probably 300 basis points or more, if it's successful. Now you're able to go directly, you're able to use your own lean team to allocate to assets.

How are you thinking about this growth in the private markets, which obviously is just continuing to expand, certainly for the high net worth business, which is I guess BDT, MSD's business and RIAs and all the things that we're all hearing about? Does it make sense? Is it too expensive in your view of when you think more broadly about why are you allocating it all in fewer buckets? That's a very long and convoluted question, but does that make sense to you?

Alisa Mall:

I think I understand what you're saying. I'm not sure if I'm going to answer it exactly, but while you've always had a gross to net spread investing with partners, one of the great things and the advantages we had at Carnegie because of our fairly small size was we can invest with really small groups that were looking in markets with very meaningful inefficiencies where you couldn't really generate outsize returns. They were sort of below institutional radar, just highly inefficient markets. And we did great.

So even if you had this spread and you were paying a management fee and a carry, the very nature of the strategies allowed you to have very strong performance. At DFO, we unfortunately can't do that because of our size and scale. And the way alternatives have evolved and the proliferation of managers and just huge growth in capital, the markets have become a lot more efficient. And I think you have seen some compression of returns. Especially at scale, it's really hard to generate huge outsize performance.

So what we have tried to do to make it make sense, otherwise we might as well just be in an index, is how can we use our unique characteristics at DFO to our advantage such that we have a competitive advantage and can generate similarly outsize returns either through structuring or through being flexible capital in a way that others can't do, either because of our scale, our speed, and ability to move quickly or flexibility around different vehicle types and structures that maybe other institutions can't do because of various regulations or restrictions.

So we still think alternatives make a lot of sense, but I do think you have to be more creative because otherwise, you're paying a lot for some of these products and the spread is a lot. And so unless somebody is generating really strong returns, and this comes back to the total portfolio approach, I do think you often have to really ask yourselves, is this worth it?

Nancy Lashine:

Well, and you don't know for a while.

Alisa Mall:

No, you don't know for a long time.

Nancy Lashine:

Probably won't know for five or six years at least.

Alisa Mall:

Right.

Nancy Lashine:

Yeah.

Alisa Mall:

I do think people like the smoothing though. Cliff Asness from AQR calls it volatility laundering. And I know from-

Nancy Lashine:

Volatility laundering, I haven't heard that. That's great.

Alisa Mall:

I think it's a great phrase because it's all fake. I mean, there is just as much volatility, but you don't see it in the marks. And there is something nice about that when you have to report.

Nancy Lashine:

I think it's sanity check, but yes, because you can't steer the ship that quickly.

Alisa Mall:

Right. No, you can't.

Nancy Lashine:

What technologies or how are you using AI or data analytics today to make your process better?

Alisa Mall:

We're trying, and we're trying to be cutting edge, though I don't know that I would quite give us that description yet. So we're using AI in human resources. We're using it a lot in back office operational stuff like pulling capital calls and pulling K-1s. We use a service that's terrific called Arch that eliminates the need for a person. Just pulls all that stuff down from the myriad portals that are out there from all your different investment partners. And then we use a bunch of stuff like in Outlook and Copilot and all that stuff.

But what we're working on is an internal system that is totally secure and just our own data where we can get summaries of quarterly letters, all the reporting, because otherwise we get huge binders the team prints out and it's too much information to consume. We also built something internally where you can ask it natural language queries like, how much of this asset does this pool own, and it will give you the answer, which is great and quick and goes a long way. Not perfect, but goes a long way.

But I know there are so many other things out there that we have just scratched the surface on. I mean, listening to Michael Dell talk about the different ways that they are implementing AI at Dell Technologies is absolutely incredible. He talks about 26 million lines of code, that there was some broken piece of code somewhere, it would've taken a Madison Square Garden full of PhDs and computer engineers to find the problem and AI did it in 30 seconds.

I mean, he's just got incredible stories of the way they're utilizing it at Dell. So we are trying to learn, and I think there's so many exciting things coming that will really change due diligence. I don't know if it'll change how we think about asset allocation, but it'll change a lot of the manual work that we do now.

Nancy Lashine:

So from your seat, because you see what's happening at Dell Technologies to some extent, and obviously you have a seat, are there going to be products that we can all use, or is it going to be the very large firms that will just be so far ahead of everybody else in terms of information advantages that the big will get bigger?

Alisa Mall:

I don't know the answer to that, but I do think the smaller you are, the bigger the disadvantage because you see huge productivity gains when you have scale and can leverage some of these things. If you're in a nine person shop, one, are you going to make the investment, and two, are you really going to see that much? You're so lean already. So I do think the big might get bigger.

I think over time though, there will be solutions that all of us use in our lives. I mean, I went to a workshop recently for a bunch of mothers, moms from my school, taught by recent college graduates of how we could be using AI in our households and in our daily lives. And it was pretty incredible. The thing of on using Claude or Anthropic or whatever, ChatGPT, you can type in six ingredients in your refrigerator and say, "What can I make for dinner? Give me two recipes."

I mean, there's just tons of examples like that they taught us in this workshop that I was like, "Wow, that's really cool." And those are things that are for everyone. And things that we do with our kids now to make research projects more interesting. And I think there's going to be things that we can all use, but I do think the larger scale organizations do have an advantage.

Nancy Lashine:

Well, since you mentioned being a working mom, circling back to that as we finish up. What advice do you have for all the many working moms out there who are trying to grow their careers but also keep it all together at home?

Alisa Mall:

So somebody gave me great advice once, or maybe it's an adage that you have career, family, friends or social life, sleep, and sickness. So five things, and on any given day you get three. And hopefully over the arc of your life and your career, it is a balance between those five. But understanding and accepting that on no given day, is it likely that you're going to knock it out of the park on all five and something always has to give on any given day. But the goal certainly is that when you're at the end of your life or at different periods, you step back and reflect that you feel like your cup is full in all of those things in aggregate.

And I think for working moms, my hat is off to all the working moms and you're one of them, Nancy. It is not easy. I really think women make the world go round. And I think for working moms, I mean, I think being a stay-at-home mom is a lot of work also, it's just different. The things we are able to juggle, and I see it with my friends, my peers, it's actually incredible. The different things you're always juggling, whether it's doctor's appointments, after school activities, your kids' play dates, your team at work, all of your professional obligations, it's remarkable. And I have tried more and more as I've gotten older to just give myself a little grace and appreciate that nobody's doing things as well as we all think they are and we're all doing a pretty good job.

Nancy Lashine:

For sure. One of the things I would often think when I would just go, "God, that was such a bollocks," a friend of mine said, "You know what the definition of a working mom is?" I said, "No." She said, "Never being in the right place at the right time."

Alisa Mall:

It's so true.

Nancy Lashine:

It made me feel better at least.

Alisa Mall:

And making the time count when you're in the places where it is, on occasion, the right place at the right time, when you're with your kids. I'm trying really hard to be a lot more present, which is hard for me, but recognizing that that time matters and quality matters.

Nancy Lashine:

Totally. Totally. Do you have any guilty pleasures you want to share with us?

Alisa Mall:

I don't get to do a lot of it, but when I do, I love binging a good TV show.

Nancy Lashine:

Yeah. Any recommendations?

Alisa Mall:

I loved Nobody Wants This.

Nancy Lashine:

Oh, that's too funny. Yeah.

Alisa Mall:

I just finished Yellowstone, which I also really liked. I've got a couple of like secrets.

Nancy Lashine:

Did you see Black Doves?

Alisa Mall:

No. Should I?

Nancy Lashine:

Yeah, it's a good one.

Alisa Mall:

Okay.

Nancy Lashine:

Yeah, Keira Knightley is great.

Alisa Mall:

And then my biggest guilty pleasure is every single day I do Wordle, Connections, Strands, and Spelling Bee. And if I have time, which I can usually blow through Monday through Wednesday, the crossword as the week goes on, that gets harder. But I do the Sunday crossword every week. I love it.

Nancy Lashine:

Wow. Well, if you could do Wednesday, kudos to you. I'm still working on-

Alisa Mall:

I flame out on Thursday.

Nancy Lashine:

I like doing it on my phone because then I do get to do the reveal.

Alisa Mall:

Me too.

Nancy Lashine:

It's kind of fun.

Alisa Mall:

Me too.

Nancy Lashine:

Alisa, you're the best. Such a pleasure. Thank you so much for sharing all your thoughts, for your time with us. It was great to have you on. Thank you.

Alisa Mall:

Thank you. It was great to be with you, Nancy.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show in making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So if you're enjoying the show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.