Senior Decision Makers: Erlina Yeo Terwelp, Columbia Investment Management Company

Erlina Yeo Terwelp · Columbia Investment Management Company

Total portfolio approach is hard to apply to private markets and private asset classes.

Columbia ran its endowment through risk-factor allocation, a dynamic risk-management approach close to today's total portfolio approach. On the public side, knowing the factor exposures and tilts let the team move quickly and see a lot. Private assets are a different animal, and that approach is difficult to apply to some private markets and private asset classes because their exposures are harder to decompose and observe.

“TPA is difficult to do with some private markets and some private asset classes.”at 21:04

Erlina Yeo Terwelp · Columbia Investment Management Company

Fund-size blowouts that drift from strategy signal AUM chasing over returns, a key exit reason.

The biggest reason Columbia breaks up with private managers is when they believe the manager is in a different strategy, with fund sizes growing well beyond what fits the strategy. Erlina frames this as a mathematical problem and asks whether the manager is now searching for AUM versus returns. She notes they sometimes accept it and that a doubling or tripling of fund size is not an automatic no. Instead the team analyzes whether the larger fund is still appropriate for the strategy.

“the idea that we think that they're in a different strategy, fund size increases that go way beyond what we feel is appropriate for the strategy.”at 33:27

Erlina Yeo Terwelp · Columbia Investment Management Company

Private markets remain attractive despite longer holds; Columbia has unfunded room to grow as public markets outran them.

Asked about companies staying private longer, fewer distributions and fewer exits, she says the attractiveness of private markets is still there and Columbia is growing its private allocation. The endowment has little venture from the 2020s and a modest illiquid portfolio, with a comfortable unfunded commitment amount. Public markets have run hard and outpaced private markets, which she says gives the endowment room to grow its private exposure, while the team keeps watching liquidity.

“The attractiveness of private markets is still there. We believe in it. We're growing it. ... We have room to grow, especially as public markets have outrun private markets.”at 37:54

Erlina Yeo Terwelp · Columbia Investment Management Company

Higher interest rates make buyout math harder, so returns must come from growth and margin expansion.

She calls higher interest rates the biggest risk for buyouts. Higher rates change the math of leveraged deals, which makes company growth and operating margin expansion more important. She wants to know whether buyout firms can still generate value today. Columbia responds by re-underwriting managers and favouring firms that have proven operating value creation, with a repeatable operating playbook, rather than relying on leverage or multiple expansion.

“The biggest one particularly for buyout is higher interest rates. It makes the math different. It makes the growth of the companies more important. Being able to expand margins a lot more important.”at 40:37

Erlina Yeo Terwelp · Columbia Investment Management Company

High-asset, low-obsolescence buyout strategies provide a buffer against Columbia's concentrated tech bets.

Columbia is not just doing tech buyouts. Five years ago it set out to build a healthy and growing allocation to high-asset, low-obsolescence strategies, which are deliberately built to be durable in a buyout setting. She says this allocation acts as a buffer against the bets in the portfolio that the team feels are concentrated, such as the tech and venture exposure.

“We also have a healthy and growing amount of the high asset, low obsolescence type strategies. ... That does act as a buffer to some of the bets that we feel are concentrated.”at 42:41

Erlina Yeo Terwelp · Columbia Investment Management Company

Sector-specialist buyout firms build an operational edge by repeatedly executing the same playbook.

Health care or consumer specialist firms that only pursue certain strategies get good at executing the same playbook. They know the executives in their sector and their reputations, and they have seen the same situations before. She sees this ability to speak the same language and understand a sector deeply as a real source of value add in buyouts, and as one of the more interesting places to find operational edge.

“When you have a health care specialist firm, when you have a consumer specialist firm that only does certain types of strategies, you get good at executing the same playbook.”at 43:09

Erlina Yeo Terwelp · Columbia Investment Management Company

Buy-and-build strategies are widely claimed but very hard to execute well; integration is difficult.

Many managers say they run buy-and-build strategies, but she always asks detailed follow-up questions because the strategy is difficult. Integrating acquisitions is hard, and creating value from one plus one equals three requires good resources and a unique way of thinking about building a business. She has seen both specialist and generalist firms do it well, but only those with the right resources and approach generate exceptional results.

“The buy and build strategies have been something that people have been talking about for a few years now. People say that they're doing buy and build. I always have a lot of follow-up questions because it's such a difficult strategy to execute.”at 43:38

Erlina Yeo Terwelp · Columbia Investment Management Company

Venture valuations are multiples of recent rounds, so Columbia diversifies across vintage years, not just 2026.

Many funds are raising and many companies are raising at valuations that are multiples of what they raised about six months earlier. Because of this, she argues the endowment should not concentrate its venture exposure in the 2026 vintage just because people feel good about AI. She wants exposure to the 2027 vintage too, arguing the next NVIDIA-scale company will not be built until 2028. Vintage-year diversification is therefore the key tool for managing this environment.

“This year in particular, with so many funds raising, with so many companies raising at valuations that are multiples of what they just raised about six months ago. ... We don't want to put all your eggs in a 2026 bucket where people feel good about AI.”at 38:56

Erlina Yeo Terwelp · Columbia Investment Management Company

Columbia worries its venture portfolio is groupthink-concentrated in widely held, popular companies.

Many investors have backed the same companies in the endowment's venture portfolio. Some of these are spectacular, generational companies and she is happy to hold them. However, she worries that this concentration reflects groupthink and carries underlying risk. Managing it means understanding what sits in the portfolio and deciding whether to add to these companies or whether the position has become over-leveraged.

“The second risk is the concentration of bets that we have in some parts of our portfolio. With regard to VC, we have a lot of companies that a lot of people have invested in. ... But I also worry a little bit about group think.”at 41:02