“David has been a key and invaluable part of building two investment offices, one at a public university and another at our current organization, a private foundation. I have had the privilege to work with him for 12 years and witnessed his ability to take on substantial roles in asset allocation, due diligence efforts, portfolio construction, liquidity management, and our building a strong diversity and inclusion effort—excelling at all of them. He is clearly worthy of being considered a NextGen leader within our industry.”
—Jonathan Hook, CIO, the Harry and Jeanette Weinberg Foundation
David Gilmore was a financial planner, advising family offices and wealthy people, when he realized that he preferred the investing portion of his job. With a bachelor’s in business from Baylor’s Hankamer School of Business and a Master of Business Administration from the University of Memphis, he became a partner and investment consultant at Gerber/Taylor Capital Advisors, which manages fund of funds providing investors access to strategies including hedge funds, private equity, and real assets.
He became the first director of investments at Ohio State University and was a key player in building out its investing capabilities. At that post, he worked under the university’s CIO, Jonathan Hook. When Hook left to go to the Weinberg Foundation, which funds nonprofits that serve the poor, Gilmore served as Ohio State’s interim investing chief. Then he followed Hook to Weinberg. There, Gilmore said, they “started from scratch” to build a solid investing operation. Now, all assets are externally managed except for real estate. Diversity and inclusion are prime objectives he has overseen.
CIO: Is cryptocurrency a flash in the pan, or an asset of lasting value?
Gilmore: Cryptocurrency is an interesting topic of conversation for many investment professionals. Mathew McDermott, Goldman Sachs’ global head of digital assets, recently stated that “Bitcoin is now considered an investable asset.” It is not very often we witness the emergence of a new asset class. As a result, this asset class still has many doubters. Bitcoin is the largest cryptocurrency by market capitalization and gets most of the press. The daily price volatility of Bitcoin is still the main drawback for investors. When you take a step back and look over longer historical periods, you can see the return and diversification benefits that Bitcoin has provided to portfolios. Over the last year, we have seen some institutions and corporations add Bitcoin and other cryptocurrency exposure.
We have not seen many large institutions publicly declare they have officially incorporated cryptocurrencies or Bitcoin into their asset allocation models. The platforms and companies built to provide services to the cryptocurrency ecosystem are an interesting way to play the growth of the industry. Coinbase and other trading platforms benefit from the growth of the networks and trading activity. The long-term value of any cryptocurrency will be dependent on adoption and usage. My main concern for the industry is the threat of regulatory changes and future disruption. Mark Cuban, Carl Icahn, and Ray Dalio have all recently expressed support for cryptocurrency and made recent investments. I do believe the cryptocurrency ecosystem will endure.
CIO: What place does blockchain have in tomorrow’s financial scene?
Gilmore: We are in the early innings of blockchain adoption and the pace of application development is growing globally. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across a network of computer systems on the blockchain. Blockchain transactions are recorded with an immutable cryptographic signature called a hash. This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. If someone wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain. Blockchains such as Bitcoin are constantly growing as blocks are being added to the chain, which adds to the security of the ledger. Why is there so much hype around blockchain technology? The blockchain is valuable because of its ability to facilitate trust through transparency and traceability.
Many central banks have been discussing adding digital currencies of their own. Blockchain technology will be the backbone of the central bank digital currencies if implemented. We have also seen many other blockchain applications in logistics, supply chain management, cross-border payments, and identity protection.
CIO: What asset class or investment troubles you most right now—and why?
Gilmore: I am concerned about the valuations of SPACs [special purpose acquisition companies] and IPOs [initial public offerings]. SPACs have corrected recently, which is healthy for the market. Many blank check companies that agreed to a merger deal, but have not yet closed, are currently trading below their $10 per share offering price. These discounts suggest some of these deals may need to be restructured.
Recent IPO valuations also remain elevated, and I am skeptical that they can persist at these valuation levels. High valuations are a risk for public market investors putting new dollars to work in recent IPOs. I am also concerned about the office sector and the long-term impact the pandemic will have on it. Companies will likely adopt more flexible work arrangements for their employees. What impact will this have on the demand for office space? This is one trend we will follow closely as the economy reopens.
CIO: What should be an investment trend, but isn’t (yet)?
Gilmore: The health and wellness trend will grow as we come out of the pandemic. Companies embraced employees’ health over the last year and I do not see that ending once we are past COVID-19. The businesses that embrace and provide services supporting a healthy lifestyle for consumers will have attractive growth opportunities. We are already seeing many startups focused on telehealth services and delivering personalized medicine.
CIO: Where do you see the most exciting areas to specialize further over the coming years?
Gilmore: The investing environment is constantly changing, so we maintain a generalist approach in our research process. I encourage our team to stay curious and explore new ideas. You never know where you will find the next exciting investment opportunity. I have found the recent progress in space exploration, blockchain technology, biotechnology, and artificial intelligence [AI] intriguing areas to spend time exploring. I get excited about the positive impact each may have on society and the potential to invest as these areas grow.
CIO: How will the pandemic have changed the economic/financial world?
Gilmore: The pandemic will have a lasting impact on the financial world. I wonder if we have hit peak globalization and question if we went too far with “just in time” supply chains. The pandemic revealed the fragility of global supply chains and how much manufacturing has moved offshore. During the pandemic, we faced shortages of PPE [personal protective equipment], semiconductors, and many other vital products. We will likely see a local manufacturing resurgence and inputs sourced closer to their end markets. Based on this, I expect to see new investment opportunities related to building more resiliency in the economy. We are also monitoring the growth in the Fed’s balance sheet due to stimulus initiatives, and what the long-term impact it will have on asset prices. We are working on building an anti-fragile portfolio for the foundation in a world of increasing correlations.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Gilmore: I would enjoy spending an hour with David Tepper at Appaloosa Management. He has great insights on the market and has a unique ability to identify market inflection points. The second hour would be all about the Carolina Panthers.
CIO: What is the best way to bring more diversity to the financial industry?
Gilmore: Building diverse organizations starts by fostering a culture of inclusion. We can all do better in bringing more diversity to the financial industry. There are many organizations devoted to encouraging and improving diversity in the financial industry, and many of these are a great resource for women and people of color seeking to enter the industry. Wall Street Bound, 100 Women in Finance, Girls Who Invest, the Robert Toigo Foundation, SEO, and Rock The Street, Wall Street are all examples of organizations that offer training programs, internships, and pathways to career opportunities in the financial industry. Supporting and partnering with these groups is a great way to advance this issue forward and have a positive impact.
An area of the foundation’s investment program that ties into the foundation’s mission is our Diverse Manager program, where we seek to partner with firms run by women and people of color. We work to help these partners grow and gain traction across the investment community, with the goal of helping grow diversity and inclusion in the asset management industry.
CIO: How will ESG change investing going forward?
Gilmore: ESG [environmental, social, and governance] investing themes and strategies will grow over the next few years. Companies are now facing a greater level of scrutiny about the long-term sustainability of their business models. Management teams must be prepared for investors becoming increasingly aware of ESG-related risks. We are seeing institutional investors reducing their carbon-related investments in both public and private markets. We have also seen an increase in engagement from our managers with public company boards to enact change.
We are seeing areas of the market that are tied to ESG investments (such as renewable energy projects), where investments are priced to perfection in our opinion and do not reflect the execution risk involved. We believe this may be due to the rapid increase of new products and demand for ESG strategies that have flooded the market over the last few years. We are excited about the growth in the space and continue to evaluate opportunities to invest.
