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Inside the Mind of a University Endowment Manager | Dan Feder, University of Michigan | Ep. 14

(If you enjoyed this, please like and subscribe!) It was a pleasure to sit down with Dan Feder, Senior Managing Director with the University of Michigan Investment Office who leads the endowment’s investments in venture capital and private equity. Prior to joining the University of Michigan, Dan was the Managing Director of Private Markets at the Washington University Investment Management Company. Dan’s career in endowment management began at the Princeton University Investment Company where he led the development of Princeton’s global private equity and venture capital portfolio. Dan has also served as the Managing Director of Private Markets for the Sequoia Capital Heritage Fund (an endowment-style investment fund sponsored by Sequoia Capital) and as a Senior Investment Manager in the endowment services area at TIAA-CREF. We covered: - Endowment portfolio construction - Incentive structures in LP land - Backing conflicting strategies - UMich’s framework to investing - Picking individuals vs firms Timestamps: (0:00) Intro (0:40) Becoming an endowment manager (2:59) Constructing an endowment’s portfolio (9:10) Risk-based investing vs uncertainty (13:07) Incentive structures in LP land (16:28) Team construction (22:26) Backing strategies that are at odds (26:06) Why LPs invest in venture (27:38) UMich framework to investing (32:29) Picking individuals vs firms (36:40) Big vs small funds (40:48) How to pick fund managers (45:41) Herd mentality in LP land Linktree: https://linktr.ee/uncappedpod Twitter: https://x.com/jaltma Email: friends@uncappedpod.com

Dan FederguestJack Altmanhost
Jun 23, 202548mWatch on YouTube ↗

At a glance

WHAT IT’S REALLY ABOUT

Dan Feder explains how endowments choose managers and venture exposure

  1. Feder frames endowment management as serving thousands of underlying endowments, with core goals of supporting steady spending, keeping up with inflation, and preserving intergenerational equity.
  2. He distinguishes asset allocation (a largely risk/volatility-based, backward-looking optimization) from true investing—especially in venture, where the edge comes from uncertainty and “unknown unknowns,” not measurable risk.
  3. Feder argues venture shouldn’t be treated as a clean “asset class,” and proposes separating “adventure capital” (uncertain, ambitious work) from routine “capital for ventures” (later-stage financing).
  4. He discusses how career-path incentives and herd dynamics push LPs toward short-term, narrative-driven decisions, and outlines Michigan’s investing framework based on institutional advantages: access, time horizon, and occasional ability to influence outcomes.

IDEAS WORTH REMEMBERING

5 ideas

Endowments are mutual-fund-like pools, not a single monolith.

Michigan’s endowment pool aggregates ~13,000 individual endowments; each holds “units” in the pool, while the pool targets stable long-term support for many distinct programs.

The endowment mandate implies an equity orientation.

To fund ~4–5% annual spending plus higher-ed inflation with tolerable volatility “forever,” a liquid baseline often starts with public equities, then diversifies into other return streams to manage risk.

Asset allocation is a risk-based, behaviorally useful constraint—especially in venture.

Mean-variance style allocation uses historical correlations/volatility to set guardrails, helping prevent overconfidence from driving too much (or too little) exposure to highly narrative asset classes.

Venture’s durable edge comes from uncertainty, not measurable risk.

Feder draws on Frank Knight: risk is probabilistic/knowable, while uncertainty contains “unknown unknowns.” Venture can earn persistent economic profit when investing on information/opportunity others can’t see or can’t yet validate.

“Venture capital” blends two different activities that should be separated conceptually.

Feder suggests distinguishing “adventure capital” (truly ambitious, not-knowable paths) from “capital for ventures” (needed financing for companies that are no longer adventurous). The former better matches endowment advantages and long horizons.

WORDS WORTH SAVING

5 quotes

“I’d rather hire somebody with a fast processor than a full hard drive.”

— Dan Feder

“Things that are not known or not knowable is the realm of uncertainty, and that is where I think venture capital has its real power.”

— Dan Feder

“The notion that venture capital is an asset class in the first place bothers me because I don’t think it is.”

— Dan Feder

“In investing, you don’t have to be right about everything. You just have to be right enough about the things that matter.”

— Dan Feder

“LPs love a good story, and GPs love to tell a good story.”

— Dan Feder

What an endowment pool is (many endowments, one pool)Portfolio goals: spending, inflation protection, excess returnAsset allocation vs investingRisk vs uncertainty (Knight/Rumsfeld framing)“Adventure capital” vs financing later-stage venturesLP incentives: outcome-focus vs input-focusManager selection: people vs firms, fund size, herding

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