20VC: From $8BN to $19BN: Inside WashU's Endowment Fund | SpaceX Made Up 20% of Our AUM | Why Europe and China Has So Much Opportunity | The Reckoning That is Coming for AI Companies with Scott Wilson

How WashU's endowment more than doubled by betting on concentration

WashU's endowment grew from just under $8bn to nearly $20bn by concentrating rather than diversifying. Scott Wilson argues private markets are less efficient than public ones, so the edge comes from investing directly alongside a few strong partners and letting big winners like SpaceX grow far beyond conventional position limits.

Takeaways

• Directs and co-investments made returns top-tier. About half the private book sits in co-investments and directs, run by generalists who spend 80 to 90% of their time with companies. Wilson says WashU would otherwise have been average among peers instead of at or near the top.
• Concentration limits are mostly artificial. SpaceX once exceeded 20% of the portfolio, held through continuation vehicles and its IPO. A typical 1% position costs close to $200m. Wilson dismisses 10% single-fund caps and expects to stay concentrated while doubling in size.
• Private markets are less efficient than publics. Privates compounded in the low to mid twenties over the last decade versus 10% for public equities. Wilson would hold 70 to 80% privates without roughly 5% annual net outflows, and WashU is now redeploying liquidity into public markets.
• Smaller funds and strict price discipline win. WashU holds no funds above $10bn and favors smaller ones that return capital faster. Weak valuation discipline is the main reason to drop a manager. Wilson calls Lee Fixel the portfolio's most talented investor for his pragmatism on price.
• Half of today's AI companies may vanish. Wilson sees leading language models as nearly interchangeable for most tasks, so providers may capture little value. Cerebras has traded poorly since its IPO and SpaceX sits near its IPO price. He expects a shakeout without a known timeline.
• The real opportunity is price below value. Wilson prefers buying a company worth 300 for 100 over paying five times the multiple for a US name. WashU runs a two-person Shanghai office, has backed China since Jamie Dimon called it uninvestable, and invests in Europe through partners.
• Not adding to winners cost billions. Wilson calls this his biggest mistake. One company WashU backed at $2bn reached $5bn without a follow-on. He also wishes WashU had sold secondary stakes in 2021, when buyers offered 80 to 90 cents on the dollar.

How Wilson rebuilt the WashU portfolio

1. Wilson had the portfolio for a couple of months before taking his seat and used that time for preliminary work on early decisions.
2. His team exited all 36 or 37 hedge funds and put in redemptions for over half the portfolio in the first week.