Ranking top colleges by 5-year returns

04 / 17 / 2019
Download this post as a PDF file
by Charles Skorina | Comments are closed

In this issue

  • The SEER 100: ranking top colleges by 5-year returns
  • Happy boards = happy investment offices
  • Women rising: not fast enough

————————————————–

Five-year endowment performance: The Big List

In February we published an abbreviated list of five-year endowment performance for fiscal year end June 30, 2018 for 61 schools to compliment the release of the annual NACUBO TIAA study.  Today, we introduce our big list with one hundred large endowments.

Every CIO on our list is experienced, dedicated, and adept at running a diversified portfolio.  But MIT produced a five-year return of 12 percent while the University of Chicago posted 6.87.  Why the divergence?

Different institutions, different goals

Every school has its own endowment payout rate and tolerance for risk.  Some schools rely heavily on the income, others place more weight on growing the principal.

It takes years to fully implement a multi-asset, multi-generational investment strategy and altering course mid-stream – a new investment chair? a change in CIOs? – can sap performance for a decade.

The challenge for the board and chief investment officer is to maintain course when market fluctuations shake conviction and crowd psychology rattles trustees.

Most high-performance institutions on our list have stable boards and long serving chief investment officers.  See: A College Investor Who Beats the Ivys.

Happy boards, happy staffs

The personalities, preferences, and experiences of board members interact in a variety of ways, usually good, sometimes bad, and occasionally incoherently.  The trick is to figure out how to work together, achieve a consensus on investment policy, and let the staff handle the investing.

#1: No surprises

Serving on a nonprofit board has many upsides; personal satisfaction, peer recognition, and an opportunity to make a difference.  But when things go wrong, the reputational risk is brutal.

No board member at Michigan State or Southern Cal could have foreseen the scandals that erupted on their watch.  And we wrote at length about past challenges at the Harvard endowment.  It takes a long time to dig out from under poor management as the current board and CEO/CIO can attest.

The job of the investment staff is not to beat Yale, it’s to meet the objectives set by the board.  Committee members show up once a quarter and shift through hundreds of items in a day.  Memories of prior meetings and who-agreed-to-what fade over time.  And bad news travels slowly.

Most CIOs issue quarterly reports to the boards, but a few brief key members more frequently, particularly the committee chairs.  Boards hate surprises, so keep them informed.

It’s better for staff to be part of the solution than seen as the problem.

#2: Education is key

Most members of most boards are not in the asset management business.  Don’t assume they know what the investment staff is taking about.  They are often highly accomplished individuals who succeeded by applying laser-focus to a single pursuit.  They may have deep knowledge in their field, but that doesn’t necessarily contribute to a coherent investment strategy.

CEOs and entrepreneurs succeed by catering to what is popular and in demand, but successful investing is often counter-intuitive.

Howard Marks, among others, has pointed out that the best investors seldom run with the herd.  They invest in opportunities that are not obvious or in favor.  And sometimes things just don’t work out. 

Two recent papers – Volatility Lessons by Fama and French and Volatility: It’s Worse Than You Thought by Phil Davis – make the point that unpredictable investment returns can upset the best laid investment plans over the “three to five-year periods commonly used to evaluate asset allocations.”

Time, patience, and the magic of compounding are powerful tools in the tax-exempt world and the CIOs on our list have spent their careers learning how to use them.  The more board members understand, the better the odds for solid long-term earnings.

Successful chief investment officers are usually excellent teachers.

#3:  Build consensus and trust

Mark Baumgartner, CIO at the Institute for Advanced Study, noted in a recent article, Minority Rapport: In Praise of Being Different, that, unless there is strong alignment of beliefs and significant trust between the board and the investment team, when an unconventional approach results in relative underperformance, there is often pressure to shift towards a more conventional approach.

Chief investment officers invest across asset classes, continents, and time horizons; meet with the best and brightest asset managers in the business; and are the first to hear of intriguing new opportunities.  Their focus is expansive, eclectic, and fluid and as broad as board members are deep.

The objective for all money managers – tax exempt funds, Wall Street asset managers, and family offices – is to combine the knowledge and experience of the investment staff and governing boards and work together to meet their goals.

Investment committees set broad policies.  Executing those policies in the day-to-day scrum of the markets — hiring, firing and monitoring of external managers — is the province of the CIO and his/her staff.

That’s how it’s supposed to work.

Our big list: half a loaf

Our SEER 100 list below shows five-year investment returns for one hundred endowments.  Almost all are currently over $1 billion AUM.

It would be great to have the target return for each school based on its policy portfolio for our 5-year period.  That would help us separate skill from luck.

Unfortunately, portfolio benchmarks are not always available, rarely comparable, and change with circumstances at each school.

The University of Chicago’s investment office, for example, consistently beats their internal performance benchmarks year after year, but ranks low on our performance chart because of the board’s investment policy.  A list based on risk-adjusted returns would make that obvious, but we haven’t attempted that here.

So, our big list compares performance among schools, but not how each school’s endowment performed relative to their own internal targets.

We have, however, inserted some industry-standard benchmarks to help orient the reader.

Note that the average 5-year return for our 100 schools is 8.32 percent.  This is only slightly higher than the 8.20 reported by NACUBO for over-$1 billion AUM schools in the same period.  We would expect this, as the two lists are highly overlapped.

We also see that, in this period, a traditional 60/40 portfolio returned 8.96 percent, significantly outperforming the 5-year return average for both the 104 over-$1 billion schools per NACUBO and our own SEER 100 list.

We think our chart highlights what the best institutional investors are capable of achieving in a specific period, but we remind our readers that there’s much more to the story.

And now, on to the big list.

Five-year endowment performance FY2018

Rnk

 

Institution

5-yr Rtns  

FY 6/30/18

Charles Skorina Co.

Pres/CEO/CIO

AUM

FY18

$000

1-yr

Rtn

%

5-yr

Rtn

%

S&P 500

13.40

1

 Mass Inst of Tech (MIT)

Alexander, Seth

16,529,432

13.50

12.03

2

 Bowdoin College

Volent, Paula

1,628,165

15.70

11.80

3

 Princeton University

Golden, Andrew

25,917,199

14.20

11.79

4

 Yale University

Swensen, David F.

29,351,100

12.30

11.61

5

 Williams College

Chilton, Colette D.

2,749,653

13.50

10.60

6

 Dartmouth College

Ruth, Alice A.

5,494,203

12.20

10.60

7

 U of Alberta

Ritter, Ron, Dir Inv

1,090,429

8.00

10.46

8

 U of Notre Dame

Malpass, Scott C.

10,727,653

12.20

10.38

9

 U of Toronto

Smith, Daren

1,925,509

8.40

10.30

10

 Queen’s University

O’Neill, Brian, Dir Inv

831,779

7.35

10.02

11

 McGill University

Leblanc, Sophie

1,256,358

6.90

10.00

12

 U of Pennsylvania

Ammon, Peter H.

13,777,441

12.90

9.90

13

 U of British Columbia

Silgardo, Rajiv

1,477,886

7.70

9.65

14

 Rice University

Thacker, Allison K.

6,277,506

12.40

9.60

15

 U of Virginia

Durden, Robert

6,953,380

11.40

9.60

16

 Carnegie Mellon U

Kennedy, Charles A.

2,385,986

11.20

9.60

17

 Stanford University

Wallace, Robert

26,464,912

11.30

9.40

18

 Rockefeller University

Falls, Amy C.

2,194,255

11.30

9.40

19

 Tulane University

Jeremy T, Crigler

1,384,371

10.80

9.40

20

 Wesleyan University

Martin, Anne

1,065,000

13.70

9.30

21

 Wellesley College

Kuenstner, Deborah Foye

2,105,212

11.00

9.25

22

 Brown University

Dowling III, Joseph L.

3,603,848

13.20

9.20

23

 Duke University

Triplett, Neal F.

8,524,846

12.90

9.20

24

 U of N. Carolina, Chapel Hill & Fdns

King, Jonathan

3,432,911

12.00

9.20

25

N. Carolina State U Fdns

Managed by committee & consultant

1,293,743

11.60

9.20

26

 Columbia University

Holland, Peter

10,869,245

9.00

9.20

27

 U of Oklahoma

Johnson, Bradley J.

1,735,527

10.00

9.10

28

 Amherst College

Geissler, Mauricia

2,377,537

10.75

9.02

29

 Baylor College of Medicine

Walker, William D.

1,272,276

10.20

9.00

60/40 S&P/Barclays

8.96

30

 U of Colorado Fdn

OCIO, Agility/Perella Weinberg

1,360,521

11.07

8.93

31

 U of Minnesota OIB

Mason, Stuart

1,420,000

8.60

8.90

32

 U of Michigan

Lundberg, Erik L.

11,901,760

10.70

8.88

33

 Swarthmore College

Amstutz, Mark C.

2,115,768

12.40

8.80

34

 U of Calif. Regents

Bachher, Jagdeep S.

11,008,035

8.90

8.80

35

 U of Arkansas

Ferguson, Vickie, Dir Inv OCIO, Cambridge Assoc.

1,199,303

10.20

8.70

36

 Virginia Tech Fdn

Ward, Dan

1,146,055

7.30

8.70

37

 California Institute of Tech

Richland, Scott H.

2,879,493

11.10

8.60

38

 Boston College

*FY May 31

Zona, John J.

2,477,700

10.70

8.60

39

 U of Rochester

Phillips, Douglas W.

2,257,557

10.00

8.60

40

 U of Washington

Ferguson, Keith

2,764,166

9.60

8.60

41

 UC Irvine & Fdn

Managed by committee & Callan

970,000

8.60

8.60

42

 U of Southern California

Mazzocco, Lisa

5,544,267

9.40

8.57

43

 Texas Christian U

Hille, James R.

1,627,790

12.00

8.50

44

 Northwestern

*FY Aug 31

McLean, William H.

11,087,659

10.30

8.50

45

 Michigan State U

Zecher, Phil

2,907,967

11.10

8.40

46

 Tufts University

Dungan, Sally M.

1,845,956

10.70

8.40

47

 UTIMCO (U Tx/Tx A&M)

Harris, Britt

32,300,000

11.37

8.34

SEER 100

8.32

48

 UCLA Foundation

Barton, Justin

2,522,638

10.49

8.26

49

 Middlebury College

OCIO, Investure

1,124,144

9.70

8.20

50

 U of Missouri

Richards, Thomas F.

1,675,019

9.40

8.20

NACUBO (>$1bn)

8.20

51

 Phillips Academy, Andover

Glantz, Kirsten Landers

1,100,000

10.10

8.00

52

 Rutgers University

MacDonald, Jason

1,330,011

9.30

8.00

53

 Emory University

Pulavarti, Srinivas “Srini”

7,292,165

9.49

7.92

54

 Oklahoma State U Fdn

Tidwell, Ryan

950,000 

10.60

7.90

55

 Indiana University & Fdn

Stratten, Gary A.

2,397,369

10.50

7.90

56

 Brandeis University

Warren, Nicholas

1,046,000

10.10

7.90

57

 U of Pittsburgh

Schuler, Greg.

4,200,206

8.90

7.90

58

 Pennsylvania State U

(ret.) Pomeroy, John C.

4,264,222

7.80

7.90

59

 Kansas University

Clarke, James, SVP Inv & Treasurer

1,740,763

10.50

7.80

60

 West Virginia U Fdn

Kraich, Rick

610,000

8.60

7.80

61

 Pomona College

Wallace, Dave

2,273,707

8.20

7.80

62

 Syracuse University

OCIO, Mercer

1,338,287

8.10

7.80

63

 Texas Tech University

Barrett, Tim

1,306,551

9.24

7.77

64

 U of Wisconsin Fdn

Van Cleave, Julie

2,985,251

9.21

7.71

65

 U at Buffalo Fdn (SUNY)

Managed by committee & Mercer

730,000

9.10

7.70

66

 U of Minnesota Fdns

Gorence, Doug

2,300,000

8.60

7.70

67

 U of Iowa

Bethea, Jim

1,079,000

8.40

7.70

68

 Washington U, St. Louis

Wilson, Scott

7,594,159

10.90

7.60

69

 Boston University

Hunnewell, Clarissa

2,197,808

9.80

7.60

70

 Cornell University

Miranda, Ken

7,230,291

10.60

7.58

71

 U of Illinois & Fdn

Ellison, Ellen J.

2,623,389

8.30

7.58

72

 Case Western Reserve U

Milanich, Tim R.

1,886,761

9.20

7.56

73

 Southern Methodist U

Dahiya, Rakesh

1,632,763

9.65

7.53

74

 Texas A&M U Fdns

Wall, Benjamin K.

1,490,000

8.90

7.52

75

 U of Georgia & Fdns

Bull, Jason

1,274,343

9.10

7.50

76

 U Calif., Berkeley Fdn

McAuliffe, David

1,944,306

8.40

7.50

77

 Washington State U

Managed by committee & Mercer

1,024,067

7.90

7.40

78

 Harvard University

Narvekar, Nirmal

38,303,383

10.00

7.31

79

 Lehigh University

Agatone, Kristin

1,353,116

9.50

7.30

80

 Oregon State U Fdn

OCIO, Agility/Perella Weinberg

510,423

9.49

7.30

81

 Johns Hopkins U

Perlioni, Jason

4,325,020

9.00

7.30

82

 University of Cincinnati

Scheer, Karl L.

1,367,426

8.50

7.30

83

 U Sys of Maryland Fdn

Gallo, Samuel N.

1,297,783

9.10

7.20

84

 Ohio State University

Lane, John C.

5,211,434

7.70

7.20

85

 Vanderbilt University

Hall, Anders W.

4,608,461

12.60

7.15

86

 U of Florida Fdn

Reeser, William S.

1,734,661

9.50

7.10

87

 Georgia Inst of Tech Fdns

Pellegrino, Brian H.

2,091,110

9.00

7.10

88

 Smith College

OCIO Investure

1,875,093

8.30

7.10

89

 U of Miami

Maynard, Charmel, VP Inv & Treasurer

1,021,508

8.31

7.01

90

 U Calif., San Francisco

Harkins, David

1,664,471

9.60

7.00

91

 Iowa State U & Fdn

Eslinger, Lisa, CFO

OCIO, Cambridge Assoc.

1,063,772

8.40

7.00

92

 Purdue U, Research Fdn

Cooper, David

2,523,770

7.80

6.88

93

 University of Chicago

Schmid, Mark

7,928,485

8.00

6.87

94

 Reed College

Lonergan, Andrew

580,000

9.20

6.80

95

 Bucknell

OCIO, Commonfund

851,000

8.80

6.80

96

 U of Nebraska Fdn

Neale, Brian

1,723,230

8.50

6.60

97

 U of Tennessee

Mecherle, Rip

1,298,212

8.10

6.60

98

 U of Kentucky

Shupp, Todd

1,361,246

6.50

6.60

99

 University of Utah

Shear, Jonathan

1,186,952

6.16

6.16

100

 Arizona State U Fdn

OCIO, Blackrock

751,000

6.90

6.10

Barclay’s Agg Bond

2.30

AUM Total

$445,449,135

1-year return

Arithmetic Average

9.89

5-year return

Arithmetic Average

8.31


Women in the top job: stiff headwinds
————————————————–

There is a paucity of women chief investment officers at university endowments, a puzzling statistic we have pondered in past newsletters.

This is disappointing considering the number of highly-qualified female investment professionals we encounter every day in our work as executive recruiters.

Despite excellent credentials, deep experience, and solid performance, women don’t seem to be making much headway.  

Our SEER (Skorina’s Enhanced Endowment Report) list below includes 17 women among the 100 endowments reporting investment returns.

Two others – Kathleen Jacobs at New York University, $4.3bn AUM and Marla Dare at the University of Alabama, $1.5bn AUM – manage large endowments but their boards do not release investment returns, so we don’t include them.

And a third, Vickie Ferguson, director of investments at the University of Arkansas, co-manages the school’s endowment with its OCIO provider, Cambridge Associates.

That brings the total to just 20 women — highlighted in a separate chart below — in CIO or equivalent roles at endowments over one billion AUM.

There’s obviously still work to be done!

Women chief investment officers at large

US & Canadian endowments

AUM

Rnk

 

Institution

Source: Charles Skorina & Co.

Women CIOs

AUM FY18 $000

1

 Rice University

Thacker, Allison K.

6,277,506

2

 U of Southern California

Mazzocco, Lisa

5,544,267

3

 Dartmouth College

Ruth, Alice A.

5,494,203

4

 New York University

Jacobs, Kathleen E.

4,266,000

5

 U of Wisconsin Fdn

Van Cleave, Julie

2,985,251

6

 Williams College

Chilton, Colette D.

2,749,653

7

 U of Illinois & Fdn

Ellison, Ellen J.

2,623,389

8

 Amherst College

Geissler, Mauricia

2,377,537

9

 Boston University

Hunnewell, Clarissa

2,197,808

10

 Rockefeller University

Falls, Amy C.

2,194,255

11

 Wellesley College

Kuenstner, Deborah Foye

2,105,212

12

 Tufts University

Dungan, Sally M.

1,845,956

13

 Bowdoin College

Volent, Paula

1,628,165

14

 University of Alabama

Dare, Marla – Dir Inv

1,451,750

15

 Lehigh University

Agatone, Kristin

1,353,116

16

 McGill University

Leblanc, Sophie

1,256,358

17

 U of Arkansas, Fayetteville

Ferguson, Vickie, Dir Inv Cambridge Assoc, OCIO

1,199,303

18

 Phillips Academy, Andover

Glantz, Kirsten Landers

1,100,000

19

 Wesleyan University

Martin, Anne

1,065,000

20

 Iowa State U & Fdn

Eslinger, Lisa, CFO/CAO

1,063,772

 

————————————————–

Notes

1. Nine endowments on our list have outsourced the investment function, something we’ll take a closer look at in our upcoming OCIO report.

2. We lean heavily on university endowments for our institutional money management studies because that’s where the data is.  Foundations, family offices, and Wall Street firms employ top investment professionals, but it’s difficult to extract meaningful data from opaque sources.  So, we go with what we can get.

3. In our day jobs as executive recruiters, we consider five-year investment returns the most useful for understanding investment committee objectives and analyzing endowments performance because five years most closely matches the average tenure of an endowment chief investment officer, which we calculate at 5.8 years.

————————————————–

The Skorina Letter

Each issue explores how the world’s most accomplished asset managers think and invest.  Original content includes profiles and interviews with industry veterans and research on compensation and investment performance.

Our insights and commentary come from our clients – board members, CEOs, chief investment officers – and the global investment community within which we work as executive search professionals.

Institutional investors operate at the crossroads of capital, talent, and ideas, shepherding over seventy trillion dollars in global assets.  It’s a constantly evolving spectacle and The Skorina Letter gives readers a ringside seat.

Prior issues can be found in “archives” on our website.

Download this post as a PDF file