Denison CIO Beat Yale in Her First Year. Private Equity Helped

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(Bloomberg Markets) -- Kathleen Browne took on the role of chief investment officer at Denison University near Columbus, Ohio, two years ago and watched the S&P 500 rise to record highs over the next several months. She was happy with the equity risk in the portfolio, but Browne, 53, started to add some exposure that might be less vulnerable to a turn in the market. So far the shift hasn’t been dramatic. ­Denison’s endowment, with a market value of $880 million at the end of June, has its largest allocation in hedge fund strategies, followed by public equities (22%) and private equity (20%).

Browne’s early experience managing money came from working at the pension fund for the company once known as Lucent Technologies, overseeing its alternative investments, including private equity. Before Denison, she worked as managing director of Wellesley College’s endowment for eight years. In Browne’s first full fiscal year at Denison, which ended in June, the endowment returned 8.8%. This beat powerhouses Yale and Harvard, which delivered 5.7% and 6.5%, respectively, over the same period. In an interview, Browne talks about the unusual start to her investment career and how she runs a successful endowment office hundreds of miles from the country’s financial hubs.

Janet Lorin: Tell us about your path from majoring in electrical engineering to law, where you worked as a private equity attorney, to money management.

Denison CIO Beat Yale in Her First Year. Private Equity Helped

Kathleen Browne: I’ve always been a math and science person, and I gravitated toward engineering. I became very well rounded by going to law school. I worked as a lawyer for about eight years. I joined the Lucent corporate pension fund and learned the investment side on the job. Once I found myself doing this investment management work, it all made sense. I was 35 when I went there, and I felt, This is it, I’ve found what I truly love doing. I started as a senior manager on the private equity team. Over time we folded real estate and hedge funds under me so I was the director of alternatives. At some point, I felt I was ready for the next step.

JL: What shifts have you made to Denison’s portfolio since you arrived?

KB: We’ve added some exposure that’s less correlated to public equities, and we’ve also been looking to enhance our venture capital portfolio. I think that could be a real value driver.

JL: Are you bullish on private equity?

KB: Private equity is really close to my heart because that’s where I started. I’m never not interested in private equity. It all depends on what’s in your portfolio. Even in a down market, that might be a good time to find opportunities. For a smaller investor like Denison, we may say, “That’s a good time to get in with a manager we haven’t been with before.” We’re not pulling back.

JL: How is managing money different for corporate pensions and endowments?

KB: It’s been a while since I’ve worked in the pension world so things may have changed. Pensions need to focus on their liabilities. When I joined the endowment world in 2009, I thought there would be less focus on that, but it was at the beginning of the financial crisis when endowments were suddenly facing liquidity crises, and it became a bigger focus of their portfolio management. It felt like those worlds were converging.

JL: For women looking to advance their careers in finance, would you suggest going the way of institutional asset management and seeking CIO roles?

KB: I’d love to see more women in CIO roles, and I’d like to see more women in finance. I tend to see more women on the investor side of institutional asset management than on the general partner side. We don’t see a lot of women in hedge funds or private equity firms. Perhaps our schedules are more regular, but we do travel. Maybe for family considerations, more women chose to work on this side. For me, being a CIO has been a great career path, but I could see women succeeding on either side.

Denison CIO Beat Yale in Her First Year. Private Equity Helped

JL: Several schools have moved their endowment offices to major finance centers such as Boston or New York. Any plans to move?

KB: I don’t think we need to. We are willing to travel. There are plenty of managers coming through Columbus to other institutional investors here. Some managers will do a Midwest tour, hitting Cleveland, Columbus, and Cincinnati. We have to work a little harder here to get out and see people and talk to people on the phone. I am starting to build out a network with CIOs in Chicago. There’s a real benefit for me to be on campus, and we haven’t had an issue maintaining a strong team here.

JL: What’s it like coming to central Ohio after the Boston area?

KB: Columbus is a wonderful city. I didn’t realize it until we moved here, and I love it. This place has everything that we want except for the ocean. Granville is a lovely town. It’s a little bit like Vermont or New England in the middle of Ohio. The seafood in Boston is great, but we love the steak here.

Lorin is an endowments reporter at Bloomberg News in New York.

©2019 Bloomberg L.P.

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