Key Takeaways
- • Erlina Yeo Terwelp, managing director on the Columbia University endowment team, says higher interest rates have ended the leverage-driven private equity playbook, shifting buyout returns toward operating improvement, according to a Capital Allocators podcast interview with Ted Seides.
- • Columbia's endowment, cited as a $14 billion portfolio, applies a five-question underwriting framework that she describes as borrowed from her former private equity firm, Cadet, with a one-page memo, five-page deal memo, and formal investment proposal.
- • Yeo Terwelp names higher rates as the biggest left-tail risk for buyouts and venture concentration with groupthink around generational AI companies as the risks that concern her most.
- • Her main defense is vintage-year diversification across 2026, 2027, and 2028, combined with HALO (high asset, low obsolescence) buyout exposure built around 2021.
- • Manager terminations, she says, most often stem from strategy drift as funds grow in size, followed by management lifecycle concerns and, least often, inaccurate information.
Summary
Erlina Yeo Terwelp, a managing director on Columbia University's endowment investment team, argues that the cheap-money era of private equity has ended. In an interview on the Capital Allocators podcast with Ted Seides, she said "Higher rates change the math," and that the burden of value creation in buyouts now falls on operating margin and growth rather than financial engineering. She said the endowment, which she described as a $14 billion pool of capital, prefers companies with "proven value creation in the operating component" and a playbook that is "sustainable, durable, and repeatable."
Her underwriting process, which she says mirrors the process used by her former private equity firm Cadet, begins with the question of which five factors will determine a deal's outcome. Each manager receives a one-page memo circulated to the full 15-person investment team. If interest develops, a five-page memo focused on the roughly five investment-specific questions goes to a smaller deal team, and only then is a formal proposal drafted for the investment committee. She also places heavy weight on reference checks, estimating that about 70% of her reference calls come through warm introductions, and says the firm has declined funds after negative off-list feedback was confirmed by other sources.
On manager oversight, Yeo Terwelp identifies three main reasons for termination, ranked by frequency: strategy drift, most often when a manager doubles or triples fund size beyond what the strategy can absorb; management lifecycle concerns, such as high turnover or carry not aligned with where talent sits; and inaccurate information, which she says is rarest but grounds for immediate termination. She describes ending manager relationships as "the hardest thing in this industry."
Her two principal risks are higher interest rates, which she calls the biggest left-tail risk for buyouts, and venture concentration. She acknowledges that many venture holdings are "generational" and says she is glad to hold them, but warns that concentration breeds complacency. Her portfolio defense rests on vintage diversification across 2026, 2027, and 2028, and on a HALO buyout sleeve built around 2021. The portfolio is heavily skewed to the US, and the team manages tilts across geography, stage, and strategy.
Her underwriting process, which she says mirrors the process used by her former private equity firm Cadet, begins with the question of which five factors will determine a deal's outcome. Each manager receives a one-page memo circulated to the full 15-person investment team. If interest develops, a five-page memo focused on the roughly five investment-specific questions goes to a smaller deal team, and only then is a formal proposal drafted for the investment committee. She also places heavy weight on reference checks, estimating that about 70% of her reference calls come through warm introductions, and says the firm has declined funds after negative off-list feedback was confirmed by other sources.
On manager oversight, Yeo Terwelp identifies three main reasons for termination, ranked by frequency: strategy drift, most often when a manager doubles or triples fund size beyond what the strategy can absorb; management lifecycle concerns, such as high turnover or carry not aligned with where talent sits; and inaccurate information, which she says is rarest but grounds for immediate termination. She describes ending manager relationships as "the hardest thing in this industry."
Her two principal risks are higher interest rates, which she calls the biggest left-tail risk for buyouts, and venture concentration. She acknowledges that many venture holdings are "generational" and says she is glad to hold them, but warns that concentration breeds complacency. Her portfolio defense rests on vintage diversification across 2026, 2027, and 2028, and on a HALO buyout sleeve built around 2021. The portfolio is heavily skewed to the US, and the team manages tilts across geography, stage, and strategy.
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