Episode summary
$2 Trillion Investor on AI Portfolio Risk, Finding Top Funds, and Preparing for a Downturn
How I Invest With David Weisburd
· · 54 min · Hosts: David Weisburd · Guests: Tim McCusker
Summary
Tim McCusker argues that advising on nearly $2 trillion matters less for scale than for perspective: NEPC sees how different missions, spending needs, and governance structures drive very different portfolio choices. He says the best institutional investors start with constraints, not with products, and that long-term thinking is the real edge because most of the market is not positioned for 1-year or even 3-year horizons.
A central theme is that even sophisticated LPs can be pulled into peer-driven behavior. McCusker says investors often worry too much about how they rank versus other endowments or pensions, and that this short-termism can undermine the right portfolio for the organization. He argues that strong governance, stable leadership, and investment committee support are often more important than manager selection alone, especially when reallocating into managers after a downturn.
McCusker also walks through how endowments, pensions, and healthcare organizations build portfolios differently, why venture capital deserves a place in portfolios beyond return history, and how co-investments work best when LPs focus on fit and speed rather than re-underwriting every deal. He closes by saying AI is the biggest current risk, not only because of existential concerns but because AI concentration, shifting correlations, and deficit dynamics are reshaping portfolio construction.
Key takeaways
- McCusker says the best LPs are long-term, governance-driven allocators, not just good stock pickers or manager selectors.
- He argues that peer risk pushes institutions into short-term behavior even when their real mandate is to serve spending needs and liabilities over decades.
- McCusker says top LPs should support managers through temporary underperformance and may even add to them when the cycle is turning.
- He says venture capital should be owned for its exposure to innovation, not only because it has historically produced strong returns.
- McCusker believes portable alpha still works, but only when liquidity, beta exposure, and risk management are structured carefully.
- He says AI is now the dominant portfolio risk because it concentrates economic growth, affects correlations, and may interact with inflation and the federal deficit.
Notable quotes
“the ability to think long-term and invest for the long-term because a lot of the rest of the market is not thinking that way”
“the biggest thing that I've learned over the years is just the it's less about the scale of that huge AUA figure, and it's more about the diversity of goals and missions across our clients”
“there is always an element of trying to understand what peers are doing. And then not being willing to go too far away from their peers”
“I think it's focusing on the long-term and then being really well diversified”
How the episode opens
This enormous pool of assets, collectively almost $2 trillion, is the ability to think long-term and invest for the long-term because a lot of the rest of the market is not thinking that way, and that introduces opportunities that aren't there for those that have a 1-year time horizon or even a 3-year time horizon.
What are those best practices that really set apart the top 10% of LPs? — Over half of the private markets funds that we've underwritten over the last decade have been in fund 1, 2, 3, or 4. So, it's a primary focus for us to find those newer ideas.
Is the difference in portfolio construction between pension funds and endowments, is it just that endowments are just much more evergreen in their nature? — A $50 million commitment to a great venture manager would be a really sizable commitment in a venture fund, but just doesn't move the needle for a $100 billion pension plan at the end of the day. So, they need to think more more broadly about their partnerships.
What's keeping you up at night today, October 2026? — I think it begins and ends with — So, NEPC advises on approximately $2 trillion in assets, with a T. What do you learn having that aperture and seeing so many different portfolios?
It's been fascinating. I've been there for 20 years watching the the growth in the types of clients that we work with and also the the assets that we advise and and support. Uh and I think the the biggest thing that I've learned over the years is just the it's less about the scale of that huge AUA figure, and it's more about the diversity of goals and missions across our clients.
And then within those, the organizational risks and opportunities that just drive dramatically different outcomes.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- institutional investing
- ai portfolio risk
- governance and incentives
- co-investment programs
- portable alpha
Companies and tickers mentioned
- NEPC
- Juniper Square
- AlphaSense
- OpenAI
- Anthropic
- SpaceX
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
