A University Endowment CIO: Fund Lives Are Too Long, and GPs and Our Math Don't Line Up
The only reason private markets exist is to make money — but 15-to-18-year fund lives put GP incentives out of sync with endowment compounding math. What you should chase isn't the return multiple, it's the velocity of capital.
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Fund lives are too long, and GP and LP math don't line up
David says he has no problem with VC itself, but he's ‘a little confused’ about fund lives: it used to be 10 to 12 years, now it's 15 to 18. He runs the numbers — an 18-year fund that goes up 15x sounds great, but roll that into three 6-year growth equity funds each going up 3x and compounding, and over 18 years you get 27x, roughly double. So the issue isn't the return multiple, it's the ‘velocity of capital’. He stresses that students can't pay tuition with a return multiple, only with dollars, so what he wants is to maximize that pile of money, and maximizing that pile is determined by simple compounding math.
— David MoreheadTalking returns without time is saying nothing at all
David says there's a rule in the office: you're not allowed to talk about returns without talking about time. Because in private markets everyone is used to saying ‘you're up 2x, 3x, 5x’, but that's no information at all — 5x over 30 years is a disaster, 5x over 5 months is a miracle. He ties this rule to ‘velocity of capital’: once velocity starts asymptotically approaching its ceiling, it's time to exit and move to the next target. He also admits this is out of step with GP interests: the GP has winners in hand, the companies are still running, and a 6x on paper raises the next fund better than a 3x — but that's the GP's business decision, not the objective he's optimizing for.
— David MoreheadWhen software stocks crashed, he judged by making calls, not by models
In early 2026 software stocks got killed, and the market narrative was ‘software is dead, everything goes to zero, anyone can vibe code a replacement’. David says he's not an engineer and a lot of Silicon Valley is beyond his understanding, but he understands how people decide. He called friends who run private family businesses with three to five hundred employees and asked, ‘if your son-in-law vibe codes something, are you going to rip out your CRM?’ The answer was ‘not in a million years’. He also cites the Salesforce CEO saying AI at best hits 93% accuracy — but software demands 100%, the books have to balance. His conclusion: in these vertical industries, software may actually be the delivery vehicle for AI, because the trust software vendors have already built translates into ‘can you add AI features on top of the software’.
— David MoreheadHe admits he can't tell the baby from the bathwater, so he gives the money to people who can
Software stocks were then at a 40-50% discount to October 2025. David's judgment was that ‘the baby got thrown out with the bathwater’, but he openly admits he doesn't know which is the baby and which is the bathwater. His approach isn't to pick stocks himself, but to give managers more money while asking them to ‘go through the list, tell me which are least likely to be disrupted by AI, and then overweight those’. He positions himself as an allocator: he makes allocation decisions based on judgments about human behavior, but relies on managers to provide ground truth in their areas of expertise. This is also what he keeps stressing — they spend more time on asset allocation than on picking managers.
— David MoreheadPublic markets are more rational than private ones, because tens of millions of people are pricing
David doesn't think public markets are a casino. His argument: private valuations work by three people sitting in a room saying ‘I think it's worth X’, then someone says ‘I'll invest at that price’, and the whole price gets reset. Public markets are traded every day by tens of millions of people on information, so they ‘incorporate all available information’ — that doesn't mean they're right, for example they've decided Elon Musk himself is a premium and SpaceX should be worth $1.8 trillion, but that's a different thing from three people making the call in private. He says explicitly that public market prices are more legitimate than private ones, no question about it.
— David MoreheadBuying the dip isn't drawing a line: invest one tranche per 10% drop
David's mechanism is very specific: if the market drops 0 to 10% they don't care, they treat it as normal volatility. He trains young analysts with a discounted-goods analogy — would you rush to the store for 10% off? What about 30% off? 40% off? They slice declines into 10% tranches and hold liquidity ready, investing one tranche for every 10% drop. So there's no line-drawing behavior like ‘it drops 20% and I go all in’; instead it's drop 20% invest 20%, drop 30% invest another 20%, drop 40% invest another 20%. He admits this means you can never be fully invested before the rebound, which is money left on the table, but what you get in exchange is never ending up in the position of ‘I love this asset so much, it keeps falling, and I have no money left to add’.
— David MoreheadIf a manager changes their game, replace them — even if they're making money
David uses a baseball GM analogy: I hired a third baseman, a shortstop and a second baseman based on batting average and fielding percentage, but if I walk onto the field and find two people standing at second base, the third baseman has to go — ‘I don't care what your return is’. He says explicitly that if the market changed, you changed with it and did well and made me money, but your positions no longer match what we're trying to do, we won't re-up. What he demands isn't that you never change, but that you talk to him before you change: ‘What makes you think you can do this, when we have no data showing you're good at it?’ He also distinguishes two kinds of change: moving from Series B to late-stage Series A doesn't matter, but moving from ‘investing in companies with product-market fit’ to ‘investing in two guys in a garage who don't yet know if they can build anything’ is not okay.
— David MoreheadThe real data center bottleneck has shifted from power to permits
David says the AI rebound is happening at the data center layer, and in his region rather than Silicon Valley. He lays out an evolution: five or six years ago the most valuable thing in data centers was land, then it was ‘land with power’, and now it's ‘land with permits and power’. The reason is that permit boards are elected by local residents, residents stick signs on their own lawns in opposition, and anyone who wants re-election has to say no. The data center parcels in his book went up 50% in six months. He also mentions something happening now: permitted owners are starting to get calls from utilities saying they can supply power earlier than planned. He judges that power prices will keep rising over the next five to seven years, until power dispatch is no longer supply-constrained.
— David MoreheadIn their own words · checked verbatim
the single reason that privates exist is to make money, period. End of story.
David Morehead13:26
It's not clear to me that the GP incentives are aligned with the math that runs endowments.
David Morehead15:35
Students can't pay their tuition with returns. They have to pay with dollars.
David Morehead16:38
there's a rule in our office that you're not allowed to talk about returns without also talking about time
David Morehead18:41
You know how things get valued on the private side? Of course you do. Three people get in the room and say, hey, I think the value is X.
David Morehead26:47
I never want to be all in. So things can always get worse.
David Morehead34:59
if I ever walk out on the field and I have two second basemen and no third baseman, the third baseman is getting fired like full stop
David Morehead50:30
enough are not happening that the power companies are coming to those who do have permits and saying, we can get you power sooner than we thought
David Morehead59:53
Figures
| Baylor endowment size | About $2.6 billion | 0:00 |
| Anthropic share of Baylor endowment | About 2.5% | 18:41 |
| Baylor private markets allocation | About 45% (range 35%-55%) | 10:16 |
| Baylor annual distribution rate | About 5% | 31:51 |
| Baylor cash opportunity cost calculation | 3.5% cash yield plus 5% opportunity cost, 8.5% total | 31:51 |
| Baylor 2025 full-year return | 9.4% | 45:22 |
| Baylor data center parcel gain | Up 50% in six months | 58:48 |
Glossary
- velocity of capital
- The number of times capital is returned and redeployed per unit of time; it determines long-term compounding more than any single return multiple.
- fund of one
- An LP puts up the money for a GP to run a single strategy just for them, with visibility into underlying holdings, rather than investing in a commingled fund.
- J curve
- The shape of private fund returns that are negative early on due to fees and unrealized gains, only turning positive later.
- commingled fund
- A fund managed by one GP in which hundreds or thousands of LPs share the same risk-return structure.
- denominator effect
- A public market decline shrinks total assets, passively raising the private markets share, which can force selling.
How to listen
VC fund managers raising now or already raised, and institutional investors who want to understand how LPs actually decide.
The first 4 minutes of ads and the Baylor admissions background can be skipped.