And John actually attributes a large part of his success in this turnaround to his targeted implementation of portable alpha strategies. And so in this conversation, we go through his industry background, how he thinks about the proper portable alpha implementation process, including what not to do, we spent a lot of time there, and also some amazing war stories of 2008, 2020, that I think we could all gather lessons from.

John holds a Master’s degree in financial mathematics from the University of Chicago, an MBA from Emory University, and a Bachelor’s degree in mechanical engineering from Georgia Institute of Technology. His achievements have actually earned him prestigious accolades, including the Lifetime Achievement Award at Institutional Investor 2022 Hedge Fund Industry Awards, and actually most recently, the 2024 Leader of the Year Award at the Allocator Prizes, presented by With Intelligence.

So without further ado, I hope you enjoy our conversation with Jonathan Glidden.

Backgrounder

[00:01:32]Rodrigo Gordillo: All right, everybody. Welcome to another episode of The Get Stacked Investment Podcast. And today we have a very special guest. We have a Jonathan Glidden from the Delta Pension Plan. John, the audience has already heard a big, long intro about your expertise. First, thank you for coming, and then maybe we could start with introducing you to the audience, and tell us a little bit about your professional journey and how your experiences have led you to become the CIO of the Delta Pension Plan and the way you run it today.

[00:03:25]Jon Glidden: All right. Well, thanks, Rodrigo. It’s great to be here. I mean, I really appreciate what you guys do, kind of having this forum for people to kind of get together and talk about using, unlocking the power of leverage and derivatives to build better asset allocations and to bring more alpha to bear. You know, I think it’s a great service that you guys do, and I love the return stacking concept. It’s not the way that I phrase it, but, you know, I feel kind of like we’re kindred spirits. So it’s great to be here.

In terms of my background, I’d have to go with, it’s been pretty non-traditional, on my way to get here. I took a Navy ROTC scholarship to go to college. I was a mechanical engineer once upon a time, but I knew that I was going to go straight in the Navy. I was a surface warfare officer in the Navy. Speaking of which, it’s going to be the Navy’s 250th birthday next year. And when you’ve got, when you have that amount of time, you collect a lot of data, right?

So I think in the Navy, they’ve done a lot of stuff right. They’ve done a lot of stuff wrong. And you know, they learn and they kind of codify what they’ve learned in a set of rules that kind of manifests itself as a checklist in the military, and in the Navy. I’d say there’s a checklist for almost everything.

And of course, as a junior officer, you know, kind of 22, 23 year old, you, there’s definitely a person, a people aspect of this as well. So you’ve got, you’ve got your checklist, but you’ve got to know how to assign the right people to the right tasks and how to do the right oversight. You know, there’s more in common with some elements of the military, in what we do on the investment side as well. So, got started in the military. Also got hooked on personal investing when I was in, this is in the late nineties. It was easy to get hooked on personal investing back then.

But I knew that there was so much that I didn’t know. So I was ready to go back to school, and kind of retool. So I said, I got an MBA, did a follow up degree on financial mathematics and derivatives pricing and stuff like that. And so with that, I was able to transition to a role with Emory University’s endowment fund.

Actually, I got my MBA while I was at Emory. Emory was in the process of institutionalizing their endowment fund. They had a large single stock concentration in Coca Cola stock at the time. That was a position that dated back to 1979. It’s the biggest reason that Emory has an endowment that’s as large as it is. But as they started to sell down the Coca Cola stock, it really did create a pretty unique blank sheet of paper opportunity for the investment staff. And I was lucky enough to work under the director of public markets there. His name was Matt Wright, guy who went on to be the CIO at Vanderbilt, another portable alpha guy.

But we’ve been reading all about the strategy and we thought that, you know, it could work. And we had the opportunity to kind of start to experiment with portable alpha in my early days. This is the early two thousands, you know, 2002, 2003, probably right around there. So, started to get experienced with portable alpha back then, and really kind of started to build out a vision, which was these, using these derivatives is really powerful. If you think about the world from a risk factor kind of perspective, so many portfolios are just dominated by the equity factor. And if you have a lot of traditional managers in a portfolio, they tend to kind of cancel each other out.

So you’ve got equity dominated portfolios, and not a lot of alpha. It is, you know, there’s got to be a better way than that. So it really kind of started building this vision and I articulated a little bit differently than you guys do it. Same concept, build better beta portfolios, and then I want two or 3 percent of alpha on top of that, or at least one to 2 percent of alpha, like a really meaningful contribution from alpha.

So, Delta came calling about 2010, 2011, and you know, I kind of talked about this vision that I’d been having. Let’s build a better beta. We can do it. Delta was in a pretty challenged position when I started in terms of funded status, so they needed quite a lot of return, and the best way to get a return that’s going to maximize the probability of success of achieving your return objective while kind of reducing the probability that you give the plan sponsor, that you give Delta cash flows or an economic situation that’s going to be difficult for them to handle, is alpha. The more alpha you can bring, the less uncontrollable market exposure you need. And, you know, in addition to that, it’s the idea of kind of, it’s not going to be a risk parity portfolio, but it’s going to be a somewhat more risk balanced portfolio. So, you know, that, you know, that was really kind of it.

You know, I grew up in Newport News, Virginia, a Navy family, spent my time in the Navy, came out, did the MBA thing, a little time at Wilmington Trust. You know, started at Delta, way back in 2011, believe it or not. Speaking of anniversaries, Delta turns a hundred next year, which is pretty amazing.

[00:08:34]Corey Hoffstein: That is astounding. I’d love for you to keep expanding on, as you were initially approaching the Delta opportunity, you started to touch on it, but why you thought portable alpha in particular, compared to all the other things, all the other ways in which pensions are managed today, was key, right, for Delta at that place and time? And maybe you could also touch upon in your answer, some of the core and guiding principles that you brought to the table in terms of taking this concept in theory, and actually building it out in practice, within Delta’s broader pension goals.

[00:09:10]Jon Glidden: So one thing about Delta is as you have a fairly challenged funded status, it tends to result in a high spending rate, and spending rate’s, very important, whatever your, kind of your net cashflow situation is. I think it’s one of the most important, maybe the most important metric for all investors to consider.

And Delta was in a position of pretty substantial negatives, in terms of we’re going to pay out 8 percent. Maybe we’d get some in from the plan sponsor through mandatory contributions, but a pretty substantial negative spending rate. When you’ve got a pretty substantial net spending rate, there’s only so much you can do in the private markets.

So to really kind of follow the pure endowment model, that wasn’t something that we could do. We do have a material allocation of privates today, but that’s as funded status has improved. We kind of built from 10 percent to 20 percent to 30 percent over the last 15 years or so, but that’s not, we couldn’t do that in the early days.

We still needed alpha in those early days. So we knew that we needed an equity centric portfolio, but we wanted to bring some more balance to it. But I mean, we needed real, real alpha. So, and I know we’ll kind of get into this during the course of our conversation, but, yeah, we want to have about, we want 120 to 160 basis points of alpha just coming from our portable alpha portfolio.

So, you know, that’s kind of the magnitude of what we’re looking for. Why is it right at Delta? Because Delta was a little needier than most. The investment challenge was a little bit more difficult than most. And I mean, if you can, if you can bring the alpha, that’s always going to lead to the best outcome that you can get.

So, yeah, that’s kind of why portable alpha at Delta. I want 2 percent per year, and I’m hoping that I can get 120, 160 of that on the portable alpha side, and then, you know, maybe another 50 to 100 basis points on the private market side. And then in terms of, kind of why do it? You guys have great research on the website and I’ve seen a lot of the same research in terms of it’s a real struggle for a portfolio of traditional managers to meaningfully outperform a benchmark. And you know, in fact, it doesn’t look that great at all.

And I talked about getting my MBA at Emory and we did the case study on stocks plus and that really opened my eyes. And again, it wasn’t, not exactly the way that you guys phrase it, but it really was, hey, you take the S&P 500, you stack some short duration on top of that, you stack some credit risk on top of that, and you stack some manager selection skill on top of that, and you can do all of that on the same dollar.

And you can model that, you know, from a risk perspective, however you need to. But to go from a point where it’s very difficult to add material alpha, maybe you can get 25 basis points, maybe you can get 50 basis points, from a portfolio of traditional managers that are highly constrained. If you’re a traditional manager, you’re long-only, that’s a constraint. There’s extension strategies and everything, but there’s long-only. And that’s a constraint, or there’s U.S. equity, and that’s a constraint, or there’s large cap, and that’s a constraint, or value, and that’s a constraint, and managers don’t like to get fired, so they’re going to be a little bit cautious on tracking error, and that’s a constraint. You start to add all these constraints together.

It’s just, it’s really difficult to add value. So core principles, you asked about, a lot of alpha was one of our core principles we want to pursue. We want to be as efficient as we really can with every unit of risk that we have and with every unit of capital that we have. So that kind of leads to the portfolio that we have here today. And I kind of mentioned the other side, we have an expected return, an actuarial expected return. We want to maximize the probability of achieving that. But there’s that risk management side as well, which is, losses hurt when you’re an underfunded pension plan.

Losses hurt. That manifests itself as mandatory contributions from the plan sponsor. And that’s another kind of key part of it is, from day one, I reported the Delta CFO. And when we did scenario analysis, it was very much, okay, what’s going to drive these scenarios in the financial markets, and what do we think that’s going to kind of do to Delta’s operating business? So we needed alpha and we couldn’t be, there was a limit on how private we could be. portable alpha. It just seemed like the perfect place at the perfect time.

[00:13:56]Rodrigo Gordillo: Awesome. And I think, a lot of people, when they think about alpha, they generally think about a long-only strategy that outperforms the benchmark, and the difference between those two things at the same level of risk, you should get some compensation for. But the alpha you’re talking about is different. So, can you actually build on that? Can you tell us a little bit about how you would approach selecting alpha sources, deciding which assets to put on top of the Delta portable alpha strategy, and also the criteria for suitability for Delta.

[00:14:28]Jon Glidden: So, I think the most powerful aspect of portable alpha is that you just change the rules of the game. A lot of market participants are playing by the same rules, and when people play by the same rules, you really do kind of get that zero sum, that zero alpha kind of effect. So, derivatives really unlock the ability to play by a different set of rules, because suddenly, alpha, this is going to be a loose definition of alpha, we’ll get more specific about this, is your ability to outperform the implied borrowing cost of your delta one, not to get confusing of your delta one derivative portfolio. So that’s what we’re trying to accomplish.

I’m not trying to pick managers that beat a benchmark. I’m trying to pick managers who can outperform the borrowing cost of my derivative portfolio. So now I can go anywhere in the world and look at any kind of strategy, and longs and shorts, and, you know, wherever markets might be a little bit less efficient. So now we’ve got the whole world as our oyster. We primarily invest in what are traditionally thought of as hedge fund strategies as we look for alpha.

I’ve got a quantitative leaning is, you know, which may have come across already. We talked about the Navy. You know, this is kind of one of my checklists. No, you can’t. Investing is not a color-by-number kind of scheme, and portable alpha certainly is not. But I like my factor models. You probably got a sense of that as well. So we just use an off-the-shelf factor model, 16 to 18 factors. And what I’m looking for is I’m looking for residual. I’m looking for a meaningful residual.

So I’m looking for returns that, you know, a statistically significant residual, and a high residual information ratio. That’s one of the primary things that I look for. I do this, this is an old-fashioned return style analysis. So this isn’t even, it’s not like risk metrics, holding base, you know, kind of stuff.

The first set of tools is a very basic return style analysis, which means you can, you’re largely working with monthly data. So a track record is helpful. It’s not required, but a track record is helpful. as we go through it. So, now we’ve got the checklist. Then you kind of get into the, is it repeatable? And you get into the people side of the business. And what I’m looking for on the people side of the business is, how do you build a team? Very specifically, how do you build a team? How do you recruit? And I want to hear a thoughtful answer.

It’s not a bad answer to say we take the best recruits from the best schools. That’s not a bad answer, but I’d love to hear something a little bit more thoughtful than that. What are your different recruiting channels? And of course the size of the manager and the, kind of the, if it’s an established manager versus kind of a new manager, you know, there’s different answers to those questions, but I want to hear something thoughtful. How are you harnessing the power of, you know, kind of diversity of thought and diversity of background to build your team? What is your recruiting, what’s your recruiting process look like? What’s your training process look like?

How do people get promoted? How do you retain people? You probably want maybe five or 10 percent personnel turnover. How do you do that? How do you make those decisions? And then as you kind of get into the decision-making process, where does the debate happen? Who, you know, how does, how is there, to borrow from Ray Dalio here, where’s the constructive conflict that leads to making the process better, and continually striving to improve?

So that’s a lot of what we’re looking for. And not surprisingly, what you get with that is you get a multi-manager hedge fund portfolio where we’ve got pretty substantial core allocations in the … space, in the multi-strategy space, and in the relative value space. And then that’s going to be augmented with equity long-short kind of specialists, where we think that there are, if they’re very focused managers, that we think can gain an informational advantage and we think kind of build better alpha models. That’s one of the, that’s a substantial holding that we’ve got as well. And then trading managers, though, it tends to be a little bit more on the macro side, both systematic macro and fundamental macro.

We do have some CTA, we do have some trend following, but we really don’t have that much, but there’s probably some elements in your questions that I haven’t gotten to yet, but this is really kind of what we’re thinking. I want residuals. I want returns that I can’t explain. I want high batting average. I want high information ratio. That’s a lot of what we’re looking for. And you need to beat the borrowing cost of my derivative portfolio.

[00:19:23]Corey Hoffstein: When we talk to other institutions, there’s sort of like three major categories. It seems when they’re allocating to alpha or some case, it’s not even alpha. It’s just alternative risk premium. It seems to be hedge funds, like what you’re talking about. And then there’s swaps through the banks, often in the QIS desks. And then there’s the stuff that they bring in house. And I was hoping you could talk a little bit about sort of, your choice seems to be mostly focused on the hedge funds. Your evaluation of sort of all three categories. Why such a focus on the hedge funds versus say swaps with a bank, or choice to bring certain skills in-house at Delta, and then finally, can you, on the hedge fund aspect, can you talk a little bit about what an effective collaboration looks like with your hedge fund partners?

[00:20:13]Jon Glidden: Yeah, you’re right in that we, derivatives trading. So we’ve got a derivatives trading partner. So we don’t have our own ISDAs. So we trade off the umbrella ISDAs of our partner, who’s one of the largest derivative traders on the planet. So they’re going to get better terms than me, and they’re going to get better execution than me.

So we outsource that overlay piece, which I guess, that reminds me, one of the questions I didn’t answer from the previous one, when we had a high expected return and a low funded status, the derivative overlay was equity centric. It wasn’t all equities. There was certainly fixed income and it was kind of like a, I don’t know, halfway between equities and risk parity. That’s kind of the way that it went.

And then as our funded status improved through the years, the only thing that really changed was the nature of the derivative overlay, and how much cash we needed to leave behind to manage margin calls and plan level liquidity. So we probably went from an equity oriented, kind of risk parity kind of thing, to probably something that looked more like 60/40.

And now we’re something that looks a lot more like bonds, but you know, there’s gold in there, there’s credit in there, investment grade, high yield emerging market debt. There’s a little bit of equity still in there. Everything else really kind of stays the same, but as we kind of start thinking this internal or external, so you know, that’s how we trade the derivative piece of it.

And we talk about that residual information ratio, and I know we’re going to talk about it as we get kind of further into the discussion, but the ability to win early and the ability to win often in terms of outperforming your benchmarks is critical if you want to keep a governance structure aligned

with what you’re doing. So I really don’t want it to, as you kind of create this into a portable alpha kind of structure, where you’re combining equity derivatives, or bond index derivatives with a pro rata sleeve of hedge funds and a pro rata sleeve of cash. And we’re benchmarking that to the traditional beta sources, like an equity or like a fixed income.

I don’t want to have that much tracking error. As you add all that together, probably 3 or 4 percent tracking error is about all I want. And I know that, up to this point, I’ve only talked about kind of the first two moments of returns, and we’ll get a little bit deeper into it, but I don’t want to take that much tracking error.

I want to win with a, I want to, I want a high batting average. I want to win a lot of months. I want to win a lot of quarters. I want to win a lot of years. And that leads us to a real focus on this concept of a residual information ratio. Now trend following is one of the factors that we track, because, to your point, if we want trend following, we could do trend following internally and not have to pay for it. But I still like the residual IR. I get better from a multi-manager, you know, kind of more old school hedge fund portfolio than I do even from a portfolio of QIS strategies.

[00:23:24]Rodrigo Gordillo: Yeah. And I think one of the challenges historically has been this idea that why would I invest in a hedge fund charging me a performance fee or high fees if they’re not even beating the S&P 500. And I think the reframing of no, no, you just need to be cash. And then I have to have consistency, you know, so you kind of delineated some of the successes of you being able to implement the portable alpha strategy, but I’m actually interested to know when you introduced portable alpha to Delta, how did you handle specific challenges, consisting of legacy strategies? What were the biggest hurdles you had to overcome?

[00:24:00]Jon Glidden: Yeah, so really kind of fortunate. I came into Delta really with a mandate for change, which was nice. I talked about Delta CFO. So I had an executive sponsor, which was nice. And Delta really had a pretty plain vanilla portfolio. I mean, yes, there were some alternatives in there and there was even a hedge fund portfolio, but it was treating hedge funds like a line item,

which is something I’m not a fan of, because once you put hedge funds as a line item, all of a sudden you do get that, well, it’s not even keeping up with the S&P 500, which of course what really has. So I love hedge funds as a more efficient source of active risk. I don’t like them as a line item, but I really inherited quite a liquid portfolio.

So the ability to make changes was really pretty easy and not all that costly. In terms of what the challenges are, they kind of just start – it’s not the easiest story to tell. You guys say return stacking. I like it. Again, I want better balanced beta and I think we can add, you know, 100 or 200 basis points of alpha on top of that.

But the first thing you’ve got to do is you’ve got to decide on the language, and the language is not easy. I decided from early on, I’m just going to use all the bad words and let’s go ahead and get all the bad words on the table at the beginning of the conversation. Let’s take as conservative of an approach as describing what we are doing as we possibly can.

We are going to explicitly leverage the portfolio. We’re going to achieve that leverage by trading derivatives. And we’re going to try to beat our benchmarks by investing in really high cost hedge fund managers. So I try to get…

[00:25:48]Rodrigo Gordillo: You didn’t get fired right then and there?

[00:25:49]Jon Glidden: I didn’t. I got a job offer out of that. I mean, that was like part of my recruiting process, right? So we decided to use all the bad words and then we said, okay, let’s, what does leverage really mean? Okay, leverage, the way we’re going to define leverage is leverage is equal to the notional value of our derivative portfolio minus the amount of cash that we have on hand. In our case, that also equals exactly the amount of hedge funds that we have, or not exactly, you know, kind of approximately.

So leverage is equal to notional value minus cash. That’s what leverage is. So at least, even if I’m using all these bad words, now you’ve got a common basis of comparison. So now where do you put the limits? You also, you need to figure out where to put the limits. The limits at Delta in the early stages, when we had a lot of equity exposure, that limit was kind of 30 percent, and we’d operate about 25%.

As we started taking some of the volatility out of our derivative program, we were able to take that limit up to closer to 50%, and we would tap into about 40 percent of that. And that’s still about where we are today. So even as you talk about reporting, you know, we’ll show an economic value, with that, sums to 140 percent or 143 percent or somewhere around in there, and then we’ll show a market value, which adds to a hundred percent. So you’ve got to get people used to these different columns. So you know, we talk about the importance of establishing the limits. How do you get a governance structure comfortable with something like this when they understand, I think, generally the high points of what I’m trying to say, but once you kind of get down to the finer points, it can get a little complex?

So how do I put the power to oversee this program in their hands? We do it in a variety of ways. So one is, we’ve created green, yellow, and red risk metrics around cash, around the cash collateralization ratio, around leverage, around the notional value of the derivative portfolio that we use. And we’ve got to agree on this up front.

Green means everything’s fine, everything’s good. Yellow means that I’ve personally approved it. And as we start getting closer to that red zone, that’s when I’ve got to reach out to my investment committee and tell them, hey, we’re getting close to a red zone here. Here’s my recommendation for what to do to kind of get out of a red zone, but I’m going to come to you.

There are guardrails around this program, where I’m going to come to you in ample time to involve you in any decisions that really need to get made. That’s on one side. The other side is success. How do you know if this is working? How do I know if this is working? That part’s actually pretty easy. The way we do it is a true portable alpha, and I understand a lot of this is kind of semantics, but we, the equity derivatives, boom, those go with pro rata hedge funds and cash into the equity composite bonds, you know, bond composite TIPS, you know, all of this stuff. Just go, are we beating our benchmarks? Are we beating our benchmarks? And we try to be as clear as we can with that.

The, some of the other challenges you get is you’ve got to be really thoughtful about what you do around liquidity. That probably deserves its own conversation and risk management.

If you’re equity heavy, you might want to do some hedging. If you’re not, maybe you don’t need to. Something else that has become a challenge. This is relatively newer, but so Delta is only $15 billion. And we borrow about half the value of the portfolio, set aside, you know, 10 or 12 percent cash.

You start getting close to UMR budgets and that, maybe that doesn’t mean a ton for your audience, but unclear margin rules. You go above 8 billion. You actually have to set aside collateral, which would kind of defeat the whole purpose of what we’re trying to do. But it’s those things, the language, the limits, the reporting, liquidity, those are really some of the primary challenges to get this off the ground.

[00:29:52]Corey Hoffstein: I want to stick with the risk theme for a moment because one of the things we’ve sort of given the benefit of the doubt to in this conversation so far is that the alpha we’re talking about, is actually alpha, that it’s truly independent from the other alphas that we’re adding, or the strategic betas that we have in the portfolio, and the thing about alpha is you don’t discover that it’s not alpha until it’s too late, right, that there was actually some latent risk factor or some emerging risk factor that causes correlations to crash towards one. And so I’d love to have you talk a little bit about how you think about monitoring and managing these correlations and the alphas that your managers are delivering and making sure you’re staying on size from a risk perspective.

[00:30:36]Jon Glidden: Yeah, one of those first rules of portable alpha is you’ve got to be careful about what you think you can control because you probably can’t. Correlation is one of those things. You can certainly measure correlation. You certainly build an expertise in understanding when you think there are similarities between managers and similar strategies.

But to some degree, there is some un-hedgeable risk that’s out there. And that could be de-grossing events, or that could be other bouts of market stress, that kind of thing. So one of the lessons I’ve kind of learned through time is the best way to kind of deal with that is to increase the number of managers that you work with.

And this is different. And this is another difference between hedge funds as a source of active risk versus hedge funds as an individual line item, where you’re trying to make 7 percent, or whatever your expected return is. A lot of people will say the only way to really make money in hedge funds is to run a concentrated portfolio. I don’t like that approach because that’s not the game I’m trying to play. I’m not trying to hit seven. I’m not trying to hit eight. I’m trying to beat the implied lending cost of my derivative portfolio, which is typically lower than what a lot of folks are after. So we tend to have about 40 hedge funds, give or take at any time.

We tend to limit our strategy exposure to something like, call it 25 percent or so That’s the biggest way that we handle it. We do have our risk model. You know, like I said, again, just time weighted. So we will process everything. We will look for what are the factor exposures for each of our managers. And we don’t like a lot. We’ll typically have a beta, in the 10 to 20 range is where we typically shake out. And that’s been, we’ve been doing, we formally launched portable alpha, I mentioned that I joined in 2011. It took me about two years to sell the vision and to build the infrastructure necessary behind it.

So we went live on July the 1st of 2014. So we’ve been at it a little bit more than 10 years now. So we run everything through the risk models. We’re looking for our residuals. We’re looking for, kind of a lack of, we’re looking really for a lack of factor exposure. I mean, you know, when is, is there auto-correlation in our return streams? There absolutely is.

Is there, I talked about the first two moments of the return distribution. That’s only part of the story when it comes to hedge funds. What are those next two moments? You’ve got your skew and your kurtosis. And this gets a little bit more qualitative and quantitative in the risk management front.

So we try to account for as many things as we can. But we know a lot of our strategies have negative skew risk and we know a lot of our strategies have fat tails and we know there’s probably some of that co-skewness and co-kurtosis out there, that negative fat tail events are likely to happen at the same time for some of our managers.

So the first step in really trying to manage that. There’s multiple steps. One is, run a 40 manager portfolio. Don’t run a 10 manager portfolio, run a 40 manager portfolio. And then really don’t put out, I’m going to say this, there’s no explicit rule because it matters what the rest of your portfolio exposures are. When we were equity centric in our derivative overlay, I really, really wanted a clean alpha profile, beta 0.1, maybe less. I don’t want credit at all. I want to be very, I want to be, I just want the alpha to be really, really clean. Now, as we’ve rotated, the equity beta of Delta’s plan probably used to be in the 70 to 80 range, and now it’s in the 30 to 40 range.

That’s a big difference. That’s even probably stress beta. Non-stress beta is probably more like 20 to 30. So now I will actually consider allowing some credit and some factor exposure in the portfolio, but I didn’t used to do that. So Corey, I can probably do better if you’ve got specific follow-up questions there. But number of funds, and factor models, and spending time in front of your managers and reading through their risk reports, and really just, you know, kind of getting the experience behind it.

[00:34:50]Rodrigo Gordillo: John, I actually want to stick to that risk conversation and really talk about the contrast between portable alpha strategies in 2008, and what we learned from that period. What do you think went wrong with portable alpha strategies during that period, and how has just broad implementation changed since then, to address those issues?

[00:35:14]Jon Glidden: Hedge fund different was, the hedge fund industry was way different back then. There’s a lot more and it started to evolve. You know, when I first kind of started in the very early 2000s, I don’t know, macro must have been 40 percent of the universe or something like that. So it had already started to change a little bit, where equity long-short was becoming a more common strategy.

But the first time you really kind of heard about portable alpha, I feel like maybe I read an article in the Journal of Portfolio Management circa 2003, 2004, and it started to kind of capture the imagination for the first time back then, because traditional managers, it was still hard to beat the benchmark in 2004, just like it is in 2024. But portable alpha started to get some buzz maybe in 2004, 2005. And they probably used quite a few of the same phrases that I’ve used. We want a high batting average, we want consistency, we want to win, we want to win a lot. And that did lead to some the usage of credit strategies in portable alpha programs and use of very negatively skewed.

It’s almost like there’s a bit of cherry picking. And I know I said a lot of the aspects of this are attractive to me, but there were a lot of untested strategies that were put together exclusively for the purpose of having a high Sharpe ratio, of having a high information ratio, and quite frankly sometimes, of having a yield that would be higher than what your borrowing costs, you know, through your derivatives was at the time.

So I think there was a much higher inclusion of really negatively skewed strategies back then, and really … strategies back then. Even at, 2000, 2002 really was a brutal time in equity markets. I think peak-to-trough equities must have been down 40-ish. It was really painful. I remember going to work in 2002, and it was just like equities went down every single day. But it’s amazing how quickly people will forget things, because you know, even by 2004, 2005, which is pretty good time all in all, that thought about, that cash collateralization ratio was another aspect of this, I think is. Equity was the primary source of the portable alpha overlay back there.

So you can beat the S&P 500. You can beat the S&P 500 by trading S&P 500 derivatives on top of a portfolio of pretty skewed hedge fund investment choices. And you really don’t need to put that much cash behind it because, let’s look at the history of equities. Maybe you only need 20 percent, what I call a cash collateralization ratio.

So, you know, I think this was a lot of the lessons that were learned. People didn’t put enough cash behind it. They didn’t have a diversified enough hedge fund portfolio, and there was more inclusion of credit oriented strategies than you should ever see in a portable alpha portfolio. I think those are some of the biggest sins that were out there at the time.

And then, I was alone in the wilderness for a long time. Because at Dell, even at Emory, we still ran portable alpha after that. Did we have a negative return year in 2008, as in we underperformed our benchmarks? Yes, we did. 2009 was one of the best years in the history of the strategy. So, but you couldn’t say it. You couldn’t say portable alpha. You couldn’t say that in polite company. You’d be ostracized, but Rodrigo, you were out there and you know, I was out there. There’s still a few of us practitioners out there, but I think those are some of the biggest, some of the biggest deals of 2008.

[00:39:01]Corey Hoffstein: You started to touch on this on an earlier question, John, but I’d love for you to expand on the idea of getting your, getting buy-in from your key stakeholders, particularly as it relates to governance, right? These are arguably nuanced and complex strategies. The implementation of portable alpha can often be very confusing to people.

We’ve mentioned all the words that people hate to hear. I mean, I remember post-2008, right? Leverage, shorting and derivatives were outright banned words. You can start to say them now today, right? But there’s, they still raise an eyebrow, particularly for those who are, who have less understanding of financial engineering. So I’m curious how you tackle these problems when it comes to reporting to key stakeholders.

[00:39:47]Jon Glidden: Yeah. So again, a lot of it started back with Delta, you know, kind of starting from a challenged-funded status and being more open-minded. Yeah, when it came to investing differently, if it meant being able to squeeze more performance, kind of, out of each unit of capital. So there was definitely an element of that. And it certainly helps when the CFO is on your side, saying in, Delta CFO was, he was really phenomenal. His name is Paul Jacobson. He’s up at General Motors right now. He understood, he took the time to really understand the strategies.

Delta’s Treasurer was the chair of the investment committee. He took the time to really understand the strategies as well. And I think that’s one aspect of it. There’s something very Corporate America about this, which is like, oh, pensions, that’s kind of finance stuff. So there’s finance representation on the investment committee. You guys will understand this. You know, we’ll ask questions. We’ll probe, and try to make sure John really, and John and his team really understand what they’re talking about. But those finance folks, they’ll really kind of understand this, but there’s an element of this from day one, and we adopted cone charts, and some of my committee members like them.

Some of them don’t, but you know, this is the idea. This is what my expectation is. My expectation is, our hedge fund portfolio should be able to beat our borrowing costs by three to four percent per year. Now, when we run an equity centric overlay, we’re going to want to put 35 or 40 percent cash behind that.

As we go to more fixed income, we’ll only put 20 to 25 percent cash behind that. So, we’re going to beat by three or four percent. And our hedge fund portfolio has ranged from 25 percent of our overall pension plan to now 40 percent of the overall pension plan. So then it really is that simple. It’s, this is my expectation. Let’s call it 3 percent. We’re going to beat the borrowing cost by 3 percent, net of all costs. That’s 3 percent on 25 percent of plan assets. We are going to, this portable alpha program is going to beat, it’s going to beat its benchmark, it’s going to beat its benchmark by like two percentage points, and it’s going to add 75 basis points to the overall plan level.

Boom. Put it on a cone chart. Don’t change it. These are my expectations. I’ve expressed them before we started, and now you’re going to see the little squiggly line as reality happens. You know where we are today with a 40 percent allocation to hedge funds, we still want to beat by 3 percentage points, 3 percentage points on 40 percent of plan assets. It’s 120 basis points. If we can get 4, it’s 160 basis points. We’re 5 over this year, which is awesome. We’ve already, portable alpha’s already added over 2 percentage points of plan level performance this year, year to date. But it’s been that set your expectation, define that.

This is what success looks like, and then talk about dollars, right? Success looks like 150 million. Success looks like 200 million. This is what success looks like. And that’s based on these expectations that we set in advance, and we never changed. And now let’s see how reality evolves, according to our expectations.

So I was given the benefit of the doubt because I had the backing of Delta’s CFO and, you know, hopefully I told the story. I took two years, took two years to get my committee comfortable with implementing this strategy, but we definitely wanted to win. We definitely wanted to win early. We wanted, I wanted this to go very well in 2011, when we launched. And of course, we launched in 2014. I joined in 2011. Euro crisis had kind of blown over by then, but 2014 was still a pretty good time to start a strategy like this. So it’s really defined success, be consistent with that. And I already had some buy-in walking in the door, but those early years were just so critical. So critical.

[00:43:47]Rodrigo Gordillo: Yeah. I mean, 2014 was great. I mean, what a great time to start doing portable alpha. And look, you’ve done it right. You took it from underfunded, you and the team took it from underfunded to possibly overfunded. Now, things should probably shift at this point. Now, how does the, how does being funded or re-funded affect your asset allocation decision, how you use portable alpha in the strategy going forward?

[00:44:12]Jon Glidden: This was all part of the initial vision. And to be honest, I wasn’t sure I was, I would ever see the day when that vision came to fruition. We are 104 percent funded today, which is fantastic. And a lot of that, our performance, the pension performance is good, no doubt about it, but Delta did phenomenally well as a company during that timeframe in terms of free cashflow.

And before they even really needed to, they used quite a lot of that free cashflow to improve the funded status of the pension. So Delta put in $11 billion from 2012 to 2021, which is a big number, huge number for a U.S. airline, of all places. During that same time period, I paid out almost $14 billion of PVGC payments and, well, benefit payments and PVGC payments, so as much money as Delta put in. We still had negative cash flow, but it was those two things. We had great return for a decade, plus a lot of contributions from the plan sponsor, based on the hard work of all Delta employees. I mean, this is a real Delta success story behind all of this.

Anyways, the vision from the very beginning was, you want your two alpha engines, you want a private portfolio, and you want a portable alpha portfolio. And it depends on what your risk tolerance is. It depends on what your cashflow situation is, how you want to weight those.

So, 40 percent is in our hedge funds today. We’ve got 30 percent in private markets today. Those are the two alpha engines that we’ve got. I know this isn’t a private market conversation. There’s a lot more that can be said there, but the idea was, get those two alpha engines up and running, nd then the only thing that needs to change, the only thing that ever needs to change is what you do in your derivative overlay.

So as funded status gets better, expected return goes down, the only thing you’re really doing is you’re reducing the amount of equity derivatives in your program. You’re increasing the number of bond derivatives in your program. And, you know, we talked about risk management. There is some complexity risk to doing this.

So we hedged as well. We had a put spread program. We had a kind of a LIBOR floor program which was intended to make a lot of money if rates collapsed, and it did. We had a lot, we had some long volatility hedge fund managers outside of the portable separate accounts, outside of the portable alpha hedge fund portfolio.

We did have some macro in those days. We did have some trend in those days, outside of the portable alpha program. So as funded status improved, we would bring down our equity and we would reduce, you know, kind of the size of our hedging portfolio. And that’s really it. I mean, if anything, the portable alpha program has actually gotten bigger, because I can reduce the cash collateralization ratio, because theoretically there’s a time recently where the realized volatility at TLT was higher than the realized volatility of SPY. I think maybe even in the implied volatility markets, that may even have been the case, which was phenomenal. But as the expected volatility of your derivative overlays, that comes down, you can put less cash behind it and you can put more money in hedge funds.

So we used to kind of look for, you call it equities plus two, and then we wanted 60/40 plus two and a half. Now, I want bonds plus three. Bonds plus three is way better than bonds. It’s way better than bonds, especially in a world where there are more avenues than ever to use excess funding in ways that can be beneficial for both the pension beneficiaries and for the plan sponsor, who’s worked so hard to kind of create this enormous turnaround. So it was always kind of the vision that the alpha doesn’t change. Your alpha engines don’t change. Don’t be forced to move around your alpha engines. It’s very cheap, very easy. Just change, the derivative overlay should change. Your hedge portfolio should change. Everything else is really the same.

[00:48:35]Rodrigo Gordillo: And what’s the volatility of the portfolio now?

[00:48:38]Jon Glidden: Ballpark’s eight, eight and a half, when you kind of put everything together. We think about it in terms of funded status volatility. So you’ve got gap funded status volatility, when you’re kind of doing a mark to market on your liability stream. So we don’t want to look, we want to be cognizant of how different we look, you know, relative to our liability stream. So we care about asset vol, but we also care, we want to keep our fund, our gap funded status volatility kind of in that four to 5 percent. That’s about eight and a half percent asset vol. Yep.

[00:49:10]Corey Hoffstein: You make this sound very easy, right? I could sort of tell the story here where you wake up January 1st, you choose your strategic asset allocation, you find the best hedge fund managers in the world. You hire their best derivatives managers in the world. You get your beta, you allocate the cash to the hedge fund managers. You go to sleep, you wake up the next year and lo and behold, you beat your market by 2%. I know the day-to-day complexities are a lot more than that. Can you talk about some of the day-to-day, like what actually makes this a lot more difficult than the narrative I just laid out?

[00:49:43]Jon Glidden: Yeah, 2022 was not a lot of fun. 2020 probably deserves its own conversation, but 2022 wasn’t a lot of fun. That’s when we were probably running something like a 40/60 kind of overlay, and everything went down. Now, we did have a private real asset portfolio that did really well. And we had some commodities and some gold and that, you know, some of that stuff did fine, but bonds were down a lot.

Equities were down a lot. Private markets, of course, not down a lot, and they didn’t mark down a lot, but it starts to skew things, right? So we’ve got this, so if all of a sudden you’re overweight privates and underweight everything else, well, now some capital that you assumed was going to be in your cash portfolio, supporting your derivative portfolio, it’s not there anymore. It’s actually kind of been, effectively been spent in your private market portfolio. So now, you know, talk about these green zones around your cash collateralization ratio, your green zones, your yellow zones, your red zones, well, all of a sudden you start getting a little bit tight on liquidity.

So then you’ve got to figure out, where do I want to get my liquidity from, and, you know, sometimes hedge funds is going to be the answer to that. We do run a risk parity portfolio as well, external managers. Sometimes maybe it’ll come from there. We act, today, we actually do have a small cash bond portfolio.

I do run a pension fund, so sometimes it’ll come from there. And then sometimes it’s like, I’m just going to have to go tell my committee that we’re going to operate in the yellow zone for a little bit, as we wait for private market distributions to get fired back up. We still have an 8.3 percent spending rate even today, and of course, those private market distributions aren’t coming or they haven’t. I think we’re about to have the three year consecutive period with the lowest amount of private equity distributions ever. Venture capital as well. I think that’s where we are. So there’s always some kind of management to do.

Where’s that cash going to come from? I’ve got to make benefit payments, and bonds have not been all that helpful. Number one, you’ve got an inverted yield curve for much of the time. So now I’m borrowing short in the derivative markets. And in Rodrigo, I forget if it was you or Corey or whoever penned it, but we had those conversations real-time. Should we be reducing our liability hedge ratio in the world of an inverted yield curve, because putting bond derivatives in place, was a negative carry strategy, and that didn’t feel great. So what’s your hedge ratio? Do you want there to be some dynamism around that?

Cash isn’t, I’m yellow zone in cash. Where am I going to get my cash from? How do we line this up? I don’t want to touch my alpha engines, but maybe I’ve got to do some small distributions out of the hedge fund portfolio. So no, there is a lot of management behind that, but it’s been fundamentally different than what we went through in 2020, where we had an equity-centric portfolio going into COVID. Now it’s been, we’ve gone between the low to the middle end of the yellow zone for our cash collateralization ratio, into the lower end of the green zone. But that’s about as much excitement as there has been.

Outside of that, you know, I love this idea of this return stacking, Right? So we’ve got really a pretty balanced beta portfolio today. We’ve got what I think is a pretty good alpha portfolio today. You know how the risk math works. Hedge funds are 40 percent of our capital. It’s only 12 percent of our risk. You know, I talk about an asset vol of 8%, if you can find more unfunded alpha at this point.

So now I’m 10 years into portable alpha. I’m 13 years into my stint at Delta. I’ve got a lot of professional credibility. Well, now maybe I can start to migrate down the information ratio ladder a little bit. Yes, that information ratio, it’s a little bit, it’s a little bit baloney, right, because part of that is the autocorrelation, and kind of the smoothing that you get with some of these strategies. But you know what? Maybe now we can do unfunded active currency. Maybe now is the time to talk to the banks about QIS strategies. Maybe now is the time to think about working with like a Morgan Stanley ALPHAS and actually writing swaps on managers. Maybe now is the time to kind of start to think about some of this, because X, just alpha is huge. Beating your liabilities is huge. And, you know, it gives us the opportunity to do some really cool things with some excess funding.

[00:54:11]Corey Hoffstein: John, I want to ask a quick follow-up question about 2022 in particular, right, because this was a period where you saw stocks and bonds go down simultaneously. But we’re talking about the pension here, right? And you mentioned this idea of a funded status volatility. As rates were going up and bonds were losing their value, you’re going to see a simultaneous drop in the net present value of your forward liability.

So how do you sort of balance that aspect of, yes, your assets are going down, but from a funded status perspective, maybe you’re not actually seeing a big pickup in, or a decrease in funded status or a big drop. increase in funded status volatility?

[00:54:47]Jon Glidden: Yeah. I think it’s one of the big things about a pension, right? It’s not, losing money is never fun. You know, losing money is never, is never good. But to your point, our gap funded status went up seven points, 7 percent, in 2022, and that’s because our hedge ratio was in the 60 to 70 range. So as interest rates spiked, it, our liability stream was down 20%.

Our asset portfolio was only down 12 percent. So our asset base had gotten up to maybe $19 billion, kind of, back in those days, and between benefit payments, we pay out over a hundred million a month. Between benefit payments and asset losses, you know, we turned it into a $16 billion portfolio, which is kind of where it still is today.

There’s a difference in the pension world between your gap funded status and a whole altogether different funded status, which is used to calculate if there’s any mandatory contributions. The one that is used to calculate if there’s mandatory contributions is really more of an asset only, not exclusively, but it’s more of an asset only kind of measure.

So if you lose money, that’s going to reduce that other funded status and they could ultimately put you in a situation where you’ve got mandatory contributions on a fully funded pension plan, from a gap perspective. So look, we have to do what’s right by the beneficiaries, first and foremost. That’s a fiduciary duty. We want to keep the gap funded status nice and high. We’re 104. We’d love to get it, you know, 105, 110, kind of in that range, but it is important to think about, the plan sponsor plays a role in this as well. And we definitely don’t want to give Delta challenging mandatory contributions at a time where it could be tough for the airline.

So gap funded status is, first and foremost, making our benefit payments first and foremost. But we do think about the world from an asset perspective as well as from a liability perspective.

[00:56:39]Rodrigo Gordillo: And John, just one follow up question with regards to your experience managing billions and billions of dollars, you got $16 billion, $17 billion up to $20 billion. Have you thought about the capacity constraints of a portable alpha strategy as you hit the $50, $100 billion mark and so on?

[00:56:56]Jon Glidden: Yeah. I think we’re really in the sweet spot, Rodrigo. We already have, about a third of our portfolio is hard frozen, and we’ve got about a quarter of our portfolio that is returning profits on an annual basis. We already have an irreplaceable hedge fund portfolio. We can do this at, if we want to have a 40 percent allocation of hedge funds, I can do this at $20 billion.

I can probably do it at $30 billion, but at some point it’s just not effective. And it’s, I saw a headline on CalPERS. I haven’t really dug into it, but I know that CalPERS, it was pretty, it was a pretty big story when CalPERS came out of hedge funds. And I totally understood why they got out of hedge funds, because I know they’re $500 billion or whatever today, but they were pretty big when they decided to get out of hedge funds as well.

They couldn’t, if you can’t build the hedge fund portfolio that you really want to build at the scale that you need, I can understand why you’re like, we’re just not going to do it at all. But I think they announced today they are going to wade back into the, wade back into hedge funds. But I think it’s a great point.

I think there is, you can’t do this at a Canadian plan. You can’t do it at a lot of the, or at least not the way that we do it, the way they do it. I’m sure they can, but you know, $50 billion, I couldn’t do it at $50 billion. $20 billion would feel great. $16 billion, we’re right in the sweet spot. I talk about that. UMR is a for real constraint. I suspect there’ll be pretty good UMR solutions as we move forward. But UMR is a constraint to us getting much bigger. We were almost tapped out on our UMR budget today, so…

[00:58:27]Rodrigo Gordillo: Interesting.

[00:58:29]Corey Hoffstein: John, you have a decade plus of experience under your belt now. And my guess is after listening to this podcast, you’ve convinced a whole bunch of people that they should start doing portable alpha with that experience, that hard earned experience that you have. What advice would you give to investors and allocators who are very seriously considering adopting this approach?

[00:58:50]Jon Glidden: So much advice/war stories and scars. I can’t stress how enough, how important that governance buy-in is to the process, and as much as it really can’t be controlled either, early wins are really important. I would advise against kind of wading into a portable alpha program where it’s like, oh, I’m going to do this strategy. I’m going to do these two QIS strategies and these two hedge fund managers. I don’t know if I do that. You really want to, you want to get the tracking error down, even if you’re presenting this as portable alpha. And the only time you see it, is your equity composite against an equity benchmark. You don’t want to underperform by a lot, and you definitely don’t want to underperform by a lot early in the process.

So, until you’ve kind of built a portfolio and it can be QIS, it could be hedge funds, it could be a mixture, until you can build a portfolio where you’re really kind of talking, in a tracking error, kind of in that three to four to five range, don’t wade in, because it’s just, it’s too much of a risk that you start.

You’ve got a great idea. You start small and you get unlucky from what your starting point is, you’ve, I’ve made my comments already. We like lots of managers. We think lots of managers is going to drive up your success rate, and that matters. Talked about, I’ve already talked about the, kind of the tracking error.

And then liquidity management is huge, and COVID was a real challenge. I’ll go into it, maybe I’ll go into it a little bit, but we didn’t model equities down 35 in six weeks, five weeks, but that’s what we got. I mentioned that, we had our, so how’d our portable alpha portfolio do? The hedge funds were down 1 percent in February. They were down 5 percent in March. So, you know, that’s how our alpha engine did over the course of those two months. Now, of course we had an equity-centric overlay at the time. We had a cash collateralization ratio. We were a little bit fortunate in that we were a little bit heavy cash in those days.

So our cash collateralization ratio is around 42 percent or so. If memory serves, that was good for about $3 billion in cash back then, but we did have, maybe it’s even more than that, but we did have kind of $2 to $3 billion, you know, I’m going to, we must have $4 billion in cash going into COVID. We had $3 billion in mandatory contributions on, in margin calls.

We have 3 billion in net margin calls and, you know, thankfully we still ran our hedge portfolio. So we had a larger margin call than we would have expected, but we also did get more convexity out of our hedging program than we thought we would. To include, the trend managers did great, even though it was a pretty sharp reversal, trend managers by and large did great.

And then we had the opportunity to kind of recapture some of not, we got a billion dollars of gains, a billion dollars of gains in five weeks, that we monetized to kind of shorten, because we had four, we had to pay out three, all right. Now we found one, of profits. So that gets us back up to $2 billion in cash, because, you know, who knows when you’re going through it? You don’t know how bad it’s going to get, and then you’ve got to look around. Okay. Where can I source additional capital from? Well, I can take some of the principal back from my long-vol managers, some of the principal back from my trend managers, from my macro managers. Don’t really want to touch the hedge fund portfolio, but I did, I almost did. So, again, kind of the biggest rules of portable alpha, don’t let market movements screw with your intended beta portfolio. Don’t let market movements screw with your alpha engines.

And I got to the point where I did it because a lot of hedge funds are kind of quarterly 90, liquidity and March 23rd was the worst day. You know, the morning of March 23rd, that was kind of like the worst of COVID. That was the day we actually kind of slipped into the red zone, and intraday on my cash collateralization ratio, and I’m like, all right, well, if I want my money back in July, I need to submit redemption requests by the end of March. So we submitted a billion dollars of redemption requests. And then we were very fortunate that it was a harsh V-shaped recovery. We didn’t, we never closed a single day in the red zone for our CCR.

We were there like during the day on the 23rd. That’s when Powell came in and said, we’re going to buy a bunch of investment grade stuff, and high yield stuff, and ETFs. And then boom, you know, it was kind of a rocket ship from there. So we were fortunate that we were able to rescind the hedge fund contributions or the hedge fund redemption requests without them ever going through, which was great, because we ended up, the hedge fund, the portable alpha portfolio ended that year up 12 percent on a weighted-average borrowing cost of under 1%. So that ended up being the best year of my career.

It was very nerve-wracking to get there, but I did violate, I got away with it, but I violated one of the primary rules of portable alpha. I submitted hedge fund redemptions. Can’t do it. Can never happen again. So we did institute a line of credit, collateralized by our hedge fund portfolio. We will actually draw on that line. We think it’s accretive. It might be diluted from a Sharpe perspective, but it’s accretive from a total return perspective.

But we’ve got dry powder on that line. So, you know, first line of defense, government money market fund. Second line of defense, prime money market fund. Third line of defense is an enhanced cash portfolio, which, by the way, should not include commercial paper. If you’re going to mess around with enhanced cash, don’t do commercial paper.

We use, we kind of use a philosophy, we’re willing to take a 50 basis point hit in the worst scenario imaginable. And so that can lead you to things like U.S. Treasury cash and carry, where we think we could probably get out, you know, Japanese, you know, kind of cross-currency trade can be interesting sometime.

Precious metal cash and carry, but not commercial paper that can turn completely illiquid. We had some commercial paper back then in our cash collateral portfolio that did become illiquid, at least part of it became illiquid, for a period. So don’t do that. So try to keep your cash like, really, really clean.

So money market funds, like a very thoughtful cash enhancement program. If you’re going to do something like that, then it really depends on what the nature of the shock is. You know, you’ve got this dry powder in a line of credit. Now, if you need to tap that, you know, that’s there. But then again, it’s, I’ve got long duration corporate bonds. I’ve got some of that. I’ve got a risk parity portfolio. Yeah, you know, I’ve got other places I can go.

Is it possible that you can imagine an equity stress scenario that doesn’t coincide with a really bad time for the airline industry? I haven’t been able to come up with one yet, but you can always ask the plan sponsor, hey, is it a good time for you to give us cash? But boy, that’s one thing no one wanted to hear from me during COVID, right? Delta’s revenues were down, I think 95%, kind of at the worst of it. So the CFO didn’t want to hear from me. The Treasurer didn’t want to hear from me. No one wanted to hear from me.

So, those are kind of a couple of the lessons learned, you know, be very conscious with what you’re tracking here, is run a lot of managers, be maniacal about your liquidity, spend the time with your investment committee, spend the time with your stakeholders. And like, I’ve got to talk to a lot of people about this. I’ve got to talk to pilot unions about this. I’ve got to talk to, I’ve got a lot of different stakeholders. I need to walk through this. I might not be doing a great job here, but, you know, try to break it down to a relatively simple story.

Corey, I like the way that you phrased it. Hey, we’ve got a great hedge fund portfolio. It’s just, hey, just go to bed and wake up in 12 months, we’ll see how it’s going. But, you know, we’ll be very, we’re very, we track things. I love data. You know, I love, okay, what can we do better? How can we get better? I love all of it. But you know, try to tell as intuitive of a story as you can. Try to tell as simple of a story as you can. Track your performance. Talk about dollar value add, do it, you know, do it a lot. So I, I could go on, I’m sure, but yeah…

[01:07:10]Rodrigo Gordillo: Well, I mean, this has been an incredible masterclass, John. I think there isn’t a lot of, at least audio and video knowledge about portable alpha. I think this is going to be a fantastic episode for people to hear. Really appreciate all of the time that you spent with us. For anybody that wants to read more, John was featured in the Investor, Institutional Investor Magazine a couple of months ago. Great piece. That’s kind of how Corey and I discovered John and decided to reach out. Also, award winner recently, With Intelligence. So, great piece. Congratulations on that. I can understand why you got that award. This has been fantastic, and John, thank you so much for your time, and, hopefully, we can exchange some more stories in a few years and have you back. But, thanks again for coming.

[01:08:01]Jon Glidden: It’s great to be here. I really appreciate all the insights that you guys post on your website. There’s no one talking about some of these finer points. It’s been a real privilege. I really enjoyed my time. Thanks guys.