Ashby Monk on Governance as a Steering Wheel and the AI On Ramp for Asset Owners

This AI moment isn't necessarily a crisis in the markets. It's sort of an existential crisis for a lot of pension funds, which is like, what do we do here? If you don't have an answer to how you're changing your organization, you're in trouble with your board.

Welcome to the Agentic Allocator. Today, we're joined by Dr. Ashby Monk, Executive and Research Director of the Stanford Research Initiative on Long-Term Investing. For over two decades, Ashby has worked closely with some of the world's largest sovereign wealth funds and pension funds on governance, organizational design, technology, and investment strategy.

Governance should be like a steering wheel rather than a brake. They're both about guiding the organization safely, but the steering wheel allows you to move forward. That's its job to avoid crashes. But brake is the wrong mindset because this is happening.

Few people sit at the intersection of institutional investing, technology, and entrepreneurship the way Ashby does. And today, we're digging into what AI adoption really looks like inside LP organizations, where the ecosystem is headed, and what it will take for the industry to get this transition right.

You got to surf the wave or survive the wave. And sometimes the people who survive the wave are the people who know how to surf it.

I hope you enjoy the conversation. Ashby, great to see you again. Thanks for joining.

Great to see you again. It's been too long. I'm looking forward to the chat.

Ashby, before we dive into our topic today, which is AI and LPs, would love to take a step back and ask you to paint the picture of LP pain points that have existed long before AI was on the horizon, if you don't mind.

Absolutely. There are many ALP pain points. These are large, understudied organizations. And I say understudied because my day job is academic researcher, and it can tend to feel pretty lonely to be one of those researchers focused on pension funds and sovereign funds. And so really, when you ask, what are the ongoing challenges, there's many we could list. But the basic problem is that the complexity of investment portfolios has far outstripped the capabilities to manage those portfolios. If you go back to the original construct of pension funds and sovereign funds, we were talking about 60-40, 60% equities, 40% fixed income. These were the models of institutional investment that really dominated the industry. A lot of passive investing, not a lot of privates. all that has been transformed into what we see today, which is, you know, funnily, this word alternative investments has almost become the more conventional form of investment rather than public equity or fixed income, many organizations are now past 50% of their portfolio being in alternatives. And so what's missing is an organization that can really handle that complexity, that opacity, through technology, through process, through governance, and all the rest. So that's the basic.

Fantastic. And obviously within that landscape and those challenges that you've laid out, LPs are also grappling with how to adopt AI in a prudent and a responsible fashion within their organizations. And you've had an incredibly unique vantage