Alice Handy, a Pioneer in Investing for Nonprofits, to Retire
Alice Handy, a Pioneer in Investing for Nonprofits, to Retire
(Bloomberg) -- Alice Handy brought Ivy League-like returns to college endowments over a four-decade career and helped build the investment management industry for nonprofits. Now, she has ceded control of her company as she prepares to retire at year-end.
Handy, 69, who founded Investure in 2003 after overseeing the University of Virginia’s endowment for three decades, promoted Bruce Miller to succeed her as chief executive officer on Jan. 1. She previously handed over the chief investment officer role to Hance West, who, like Miller, has been with the company since it started.
“They’ve never been more ready,” Handy said in an interview about the team overseeing the 45-person company.
Long Career
The succession is the final chapter of a storied career. At the University of Virginia in the 1980s, Handy was early among endowments to diversify into international equities and then to embrace alternative assets such as private equity and hedge funds in the 1990s. The university’s endowment grew from $60 million when she was hired in 1974 to $2 billion when she left in 2003, making it one of the largest among U.S. public colleges.
Investure, based in Charlottesville, Virginia, produced top performance for clients including Smith College and about a dozen other endowments and foundations. Her success inspired countless competitors as nonprofits embraced the concept of outsourcing their investment offices. About $100 billion has been outsourced in higher education, more than double since 2010, according to data compiled by Bloomberg. Investure manages about $14 billion.
“She really created a whole industry at some level,” said Verne Sedlacek, the former CEO of Commonfund, a money manager for nonprofits.
Avoided Bubbles
At UVA, Handy avoided market bubbles and managed risk. The fund liquidated its sizable exposure to technology stocks before the dot-com bubble burst, shifting more than half the school’s portfolio into hedge funds. She bet against the stock market in 2007, helping limit losses when global markets collapsed the following year.
She also exploited UVA’s rich network of alumni by backing startups such as John Griffin’s now-closed hedge fund Blue Ridge Capital in 1996.
At Investure, clients such as Smith reaped the benefits. The women’s college in Northampton, Massachusetts, saw its endowment catch up with rival Wellesley College by 2011, with about $1.5 billion in assets.
Investure has faced defections in recent years as clients demanded more discretion to screen out investments. In 2014, she cut ties with Rockefeller Brothers Fund after it decided to fight climate change and sought to divest from fossil fuels. Handy pools clients’ money among asset classes, which she says creates scale and reduces fees. Divesting for one client means divesting for all of them.
“She said it just doesn’t work. This is the business model,” Stephen Heintz, the fund’s president, recalled recently. “It was the right decision for her.”
The Commonwealth Fund, a New York-based foundation that supports health care, departed last year for a unit of Perella Weinberg Partners because it wanted to exclude tobacco-related investments. It was followed by Barnard College, which had voted to divest from companies that deny climate change.
“Our model is all or nothing,” Handy said in a Nov. 10 speech at UVA’s Darden School of Business. “It’s pretty audacious but that’s how we started out. There was really nothing out there like it.”
The defections raised concerns about whether Investure’s model of pooling assets had become dated as competition intensified and firms offered to tailor portfolios, said Sedlacek. There are dozens of companies in the outsourced CIO business, from niche players to Wall Street behemoths such as Goldman Sachs Group Inc. and BlackRock Inc.
“The question is, can it survive without her?,” said Sedlacek.
Clients Reviewed
At least four other clients in the past two years conducted reviews of their relationships with Investure. While none departed, it reflected the concern some had with Handy’s plan to retire as well as Investure’s weak performance in fiscal 2016, according to a person with knowledge of the matter who asked not to be identified because they weren’t authorized to speak about it publicly.
Smith’s fund lost 5.9 percent in fiscal 2016, more than twice the average of 2.5 percent for university endowments, according to data from Cambridge Associates. Investure client Trinity College in Hartford, Connecticut, lost 5.4 percent, blaming public equity, hedge fund and private equity investments without offering further insight in an annual report.
Handy declined to comment other than to say a number of funds hurt performance. Investure bounced back last year with average returns of about 12 percent, in line with industry averages.
“The business was so closely associated with me that it was natural that there was a shaking up,” Handy said.
Dickinson College, which has a $380 million endowment, said in October that, following a review, it would remain with Investure because of “continued expectations for superior results.”
Faced Pressure
Smith also said that same month that it would stay with the company. The school faced pressure from students to cut ties in order to divest from fossil fuels. Smith said it’s working with Investure to identify investments that produce environmental and social benefits and that it will avoid direct holdings in coal.
Handy has launched a sustainable investing pool for her clients though her other funds still have exposure to fossil fuels. She has added five clients since 2014, including the University of Denver and the Skillman Foundation.
“I have a tremendous amount of confidence in her,” said William Spitz, the former head of Vanderbilt University’s endowment who left in 2007 to help start money manager Diversified Trust. “She is very diligent and I’m 100 percent confident she structured her firm in the right way” for the succession.
--With assistance from Kate Smith
To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net.
To contact the editors responsible for this story: Mary Romano at mromano6@bloomberg.net, Alan Mirabella
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