‘Go Where the Money Isn’t’ and More Advice From Endowment Chiefs
(Bloomberg Markets) -- Universities are increasingly expensive to operate. The executives who manage school endowments, which help pay for most of those costs, experience the same challenges as other institutional investors. Managers in charge of assets totaling more than $174.4 billion spoke with Bloomberg Markets about lessons learned from the financial crisis and their long-term view on investing.
Chief investment officer, Clemson University Foundation, with $700 million in assets under management
“Patience is very important. In today’s society we aren’t patient, possibly due to our technologically advanced environment. I try to offset this unnatural stimuli by picking hobbies that require patience, such as gardening or redoing a house. This training benefits me as an investment professional, especially in periods of market volatility.”
President, Princeton University Investment Co., with $23.8 billion in assets under management
“Look beyond long term;
Bet only where advantaged;
Whole is more than sum.
Preserve real value;
Forever is far.”
CIO, University of Oregon Foundation, with $900 million in assets under management
“Merely using an asset allocation model will not win the day. With so many bright, hardworking people with so much capital to allocate across so many asset classes, investing rather than allocating will likely win the day. Our mantra is ‘Special niches and special people’—go where the money isn’t and where the talent is thin, to generate the best risk-adjusted returns.”
CIO, Texas Christian University, with $1.6 billion in assets under management
“In the asset management business, you need discipline and a steady hand, and that feeds into having good judgment. It means not chasing what others are chasing, that you can go your own way.”
Chief executive officer, Commonfund, an investment manager for endowments, including those at Trinity College and Bucknell University, with $25 billion in assets under management
“I worked on Wall Street during the financial crisis and learned an indelible lesson: It takes liquidity to survive a crisis. The companies that failed, and the borrowers, investors, and funds that struggled to meet their obligations, all shared a common trait: a lack of liquidity. As an investor responsible for portfolios, and a leader responsible for an organization, I now test for liquidity and stress in every decision. Of course, we don’t want to just survive a crisis—we want to thrive. And there were both survivors and thrivers in the financial crisis. The difference between them was more than liquidity. It was a mix of qualities that allowed the thrivers to take bold action when others were fearful.”
Senior vice president for institutional resources, University Of Rochester, with $2.5 billion in assets under management
“The single most important thing I learned is that professional investing, perhaps more so than any profession, is a people business. I know that is a timeworn expression, but in the final analysis of investment performance, the lone factor behind success is people who make decisions.”
Managing director, Goldman Sachs Asset Management’s Global Portfolio Solutions Group, an investment manager for institutional investors, with assets under supervision of $113 billion (more than $87 billion of which is in outsourced chief investment office assets)
“Portfolio construction is critical. It’s getting that design right so it has built-in resilience. But we still need to be flexible enough to adjust to client needs. Client objectives and constraints are all unique combinations. We spend considerable time getting to know our clients’ investing goals and liabilities in a quantifiable way. Relative to five years ago, we have much more robust asset and liability analytics to assess trade-offs and introduce new strategies to support these critical inflection points.”
Retired CIO, Emory University, and investment management consultant. She managed $6.9 billion of assets at Emory
“Returns reported without clarity of time period and appropriate benchmarks are misleading. Listening is your best due diligence tool. Investment management is a people business. In addition to deep due diligence, you must build trust and rely on your judgment of people before investing, whether it’s hiring an investment manager or investing in a company.”
This story appears in the Pensions & Endowments special report from Bloomberg Markets.
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