Diversification is protection against ignorance; it makes little sense if you know what you are doing. —Warren Buffett (1996 annual meeting)

Janet Lorin, Bloomberg News, reported recently that Washington University in St. Louis (WashU) could see an astonishing 3000 percent return on their endowment’s $50 million dollar investment in SpaceX.

When asked how this came about, Scott Wilson, WashU’s prescient chief investment officer said, “We try to find really great partners and do interesting things. When they find something that is super attractive we try to add capital to those individual ideas.”

[For a more substantive reveal, here’s a recent interview with Mr. Wilson, courtesy of Ted Seides, Capital Allocators]

No free lunch

There has been a perceptible shift the last few years away from broadly diversified asset-class constructs toward more concentrated portfolios.

Jagdeep Singh Bachher, Ph.D. and chief investment officer at the University of California regents, wrote in UC’s 2025 annual report that his staff intends to invest in fewer, higher quality, top-performing assets.

“Experience has shown us the value of lean, high-performance teams working collaboratively to manage a concentrated, high-conviction portfolio.

We’ve greatly reduced the number of external managers we use and the number of line items on our books. That makes it easier to understand what we own, especially in a crisis, and gives us fewer decisions to make.

The result is a small, agile team laser-focused on areas where we can outperform the market.”

Boards matter

Concentration and high conviction are all well and good, but how many university trustees have the fortitude to weather unruly markets? As it is, the double-edged attacks on university budgets from research cuts and endowments taxes have put schools in serious binds.

Richard J. Chang, reporting for FundFire (an FT service), noted recently that large endowments contribute on average about ten percent to university budgets, (source: Christian Tiu, associate professor of finance at the University at Buffalo School of Management).

However, some schools lean on their endowment for much greater support, in Princeton’s case for example, sixty-five percent of the 2026-27 operating budget.

Mr. Wilson’s winning ways

Embracing risk is a hard sell on campus these days.

As a former Wall Street trader, fly-over college CIO, and staunch individualist, how many schools would have hired Mr. Wilson as chief investment officer do you suppose? When, by our latest count, nearly two-thirds of university CIOs come from peer group endowments.

Fortunately, the WashU trustees spotted a winner and signed him up. And thanks to Mr. Wilson and his investment team, the endowment has moved from fourth to top quartile and even top decile since Scott joined in late Q4 2017.

In our latest endowment performance report, WashU ranked seventh out of one-hundred twenty-two schools over one billion AUM for the ten-year period ending June 30, 2025, doubling in size on Mr. Wilson’s watch from roughly seven billion to over fifteen billion dollars while maintaining a yearly distribution of four to five percent.

The rest of the story . . . (Paul Harvey 1918 – 2009, ABC News Radio)

How WashU built a winning team.

The Washington University in St. Louis endowment had been underperforming its peer group for years and by 2016 the trustees had had enough.

So, the President and board forged a commitment to pursue whatever measures necessary to build a preeminent investment organization – keenly aware that better returns add millions, even billions, to school coffers over time.

In 2016, while he was still CIO of Makena (OCIO), the WashU board asked Eric Upin, an alumnus, university trustee, board chair of the investment management company (and former Stanford CIO) to serve as Interim CIO and Chair of the Search Committee – with emphasis on restructuring portfolio strategy, the investment team, board governance, compensation, and retention.

As a Trustee with full-on university support, Mr. Upin wielded a forceful writ.

The IMC board began their transformation with unvarnished self-reflection and concluded that tentative, short-term thinking was part of their problem. This, in turn, had led to conflicted guidance and mixed signaling to the investment staff.

The board asked:

• What is our primary goal?
• How should we measure success?
• Define the roles of the board and team?

During the year and a half period before hiring Scott Wilson, the board studied the qualities and characteristics of top-performing endowments and portfolios, as well as those that consistently underperformed or fell out of the elite class.

In total, the board spent five years working on governance, compensation, and liquidity management.

Lessons learned

The trend is your friend… until it isn’t. —Anonymous

Our latest endowment performance report features ten-year and one-year returns, along with AUM, for one-hundred-forty-six US and nine Canadian institutions, the latest available.

In our line of work, recruiting talent and creating opportunities for institutional and family office clients, we like hard data on the individuals who manage institutional and family money.  Returns may be historical, but they are useful clues to an investor’s views, process, and discipline.

Bulls and brains

For the fiscal year ending June 30, 2025, institutional investors with public equity tilts lived their best lives ever. Chris Hohn et al at TCI, a value orientated, fundamental investor, earned an estimated $18.9 billion in 2025 according to the Wall Street Journal. CNN’s year-end headline said it all. “US stocks just posted a third straight year of stellar gains.”

(Exhibit 1, Index returns.)

*https://www.spglobal.com/spdji/en/commentary/article/us-equities-market-attributes-june-2025/

But it’s never really that simple, is it?  Institutional investors operate in an uncertain world and despite the last few years of bull market bliss, the tide inevitably recedes. 

As one OCIO industry stalwart writes, the challenge for endowment and foundation investment officers is, “How can we capture real endowment returns that exceed what is required while actively managing downside risk?” 

(Exhibit 2, S&P returns since 1950)

No such thing

When it comes to money, there’s no such thing as passive management.  Robert Seawright in We are all active managers contends that “most descriptions of passive investing assume a cap-weighting strategy, but that is necessarily an active choice. Most ETFs use rules-based, non-discretionary approaches, but the rules are all determined by active choice. Moreover, the active/passive performance divide is more about fees than ideology, and fees are chosen.”

Most stakeholders – pensioners, students, faculty, foundation beneficiaries, charity recipients, board members – focus more on today’s headlines and the next budget or grant cycle than what might happen fifty years down the road.

Top institutional investors take a longer view. They temper their emotions, place well researched bets, and hold fast come rain or shine.

Serious matters

Phil Zecher at Michigan State University, for example, our featured chief investment officer in last year’s endowment report, took the helm ten years ago.  At that time the endowment ranked forty-two, flat in the middle.  Last year MSU’s endowment ranked eighth in our league tables.  This year MSU sits at number four.  Big moves worth millions.  Who says CIOs don’t matter?

Final thoughts

Chief investment officers, investment staffs (and OCIOs) earn serious money for their schools and cost a relative pittance to maintain.  Many college athletic programs, on the other hand, are staggeringly expensive as Matt Hayes recounts in USA Today, and their intrinsic contribution to academic health is debatable.

And yet, when coaches meet with college boards the rooms come alive. Excitement builds, time is forgotten, and everyone wants a selfie with these masters of the arena.

But, alas, when CIOs take their turn it’s back to dreary business.  Eyelids grow heavy, attention wanders.  Like that Philips’ bulb commercial, The Magic’s Gone.  Human nature I suppose, but still, endowments pay the bills and keep the lights on.

The U.S. has the greatest university system in the world, a true competitive advantage, thanks to generous donors and visionary leaders, and our endowments are a major source of financial support.  Chief investment officers, their staffs and outside managers play a vital role in this success.  Let’s show them some love. How about a selfie?

Endowment Performance 2025

We have grouped our endowment performance data into four sections:

122 US endowments over $1bn

23 US endowments, $500mm to $1bn

3 US endowments, non-June 30 FYs

9 Canadian endowments (CAD about $0.70 US)

OCIO firms manage twelve endowments over $1 billion and seven between $500 million and $1 billion among our cohort. They are highlighted in green.

A few public market indexes are included for context.

(Exhibit 3,Various Benchmark Indexes)

Updates and edits

Try as we might, there are bound to be errors. Please let us know. We will make the changes and send out an update in a few weeks. 

To all those who helped us, thank you. We greatly appreciate it.

—Charles Skorina

(download newsletter as PDF) (download tables as PDF)

The price of ability does not depend on merit but on supply and demand. – George Bernard Shaw

For our summer 2023 OCIO directory we wrote: Despite the Nasdaq losing a third of its value, 33%, the Russell 3000 down by 20.48%, the S&P 500 off 20%, and the Dow shedding 9%, total outsourced assets on our list dipped a tenable 9.5%, or $356 billion to $3.4 trillion.

How quickly time flies.  Today, with global markets hitting record highs, our latest directory flush with providers, and related AUM over five trillion dollars, discretionary outsourcers of every persuasion are charging ahead chasing assets and fees.

But we can’t help but wonder, are there really that many fully-integrated, conflict-free, financially-grounded, independent investment offices – to paraphrase Hirtle Callaghan’s raison d’etre – fit and able to serve the needs of families, foundations, and related nonprofits?

Supply and demand

There’s torrential demand as waves of new money seek professional advice.  And a supply gusher as stalwarts and wannabes rewire their practices for OCIO prospects.

Every week it seems someone we’ve never heard of with three, four hundred million comes calling.  Their wealth has surged, they’ve funded a foundation – or sit on the board – and it’s all getting out of hand.  Everyone’s after a piece of their pie, they’ve browsed through our directory, and they’re looking for a firm they can trust.

“The US commands an extraordinary 34% of global liquid private wealth and houses 37% of the world’s millionaire population according to the latest Henley & Partners wealth report.  And this wealth dominance extends across all brackets, with 36% of the world’s centi-millionaires (those with USD +100 million) and 33% of its billionaires residing in the US.”

Eying the celestial end of the wealth spectrum, the Wall Street Journal reports: “The net worth held by the top 0.1% of households in the U.S. reached $23.3 trillion in the second quarter this year, from $10.7 trillion a decade earlier, according to the Federal Reserve Bank of St. Louis. The amount held by the bottom 50% increased to $4.2 trillion from $900 billion over that period.”

The big squeeze

Pricing plans are crumbling as cost increases and fee compression undercut margins.  Revenue on managed assets topped $58 billion in 2024 announced Boston Consulting Group, but almost three-fourths of the gain (70%) came from market performance and a move to lower-priced products.

Meanwhile, it takes a small fortune to field a full-service institutional grade practice as compensation, sourcing, due diligence, cyber-security, audits, and compliance expenses continue to climb.

“Shifts in product offerings and approaches to distribution, industry-wide consolidation, and the need for radically leaner cost structures” are behind the squeeze.  To fatten margins, BCG suggests offering actively managed assets such as active ETFs, model portfolios, and separately managed accounts, and offering private assets to retail clients.

But therein lies a dilemma.  To truly serve clients, aren’t discretionary outsourcers obliged to avoid the conflicts and temptations endemic in money management?  Alicia McElhaney, Institutional Investor, describes the quandary:

“A pioneer in the outsourced chief investment officer business says it’s necessary to be both a pure-play provider — with no products to sell — and have scale.  A large asset manager believes disclosing and managing potential conflicts is enough.  A search consultant says no OCIO is truly free of competing interests.”

OCIOs everywhere

What exactly is an outsourced chief investment officer?  To date there’s no industry standard or designated authority to police the usurpers.

We publish our directory to help families and institutions locate, review, and connect with full-service discretionary outsource investment managers.  If a firm says they provide OCIO services, and their website suggests they do, we usually, though not always, add them. But there sure are a lot of them.

[For this issue we removed five firms and added one, Third Lake Partners.]

Institutional grade OCIOs are sophisticated operations.  The crème de la crème have years of experience – time to fully hone systems, service, succession, and investment capabilities.  Hirtle Callaghan and Blackrock opened for business in 1988, McMorgan & Company set up shop in 1969, Brown Brothers Harriman and JPMorgan Chase date back over two centuries.

Adding to the muddle, each OCIO has its own culture, client mix, investment style, and biases.  Some firms focus on indexing and liquid markets, others on alternatives, still others on ESG.  Some customize portfolios for clients, others don’t.

Final thoughts

The outsourced full-discretion investment business is hyper-competitive, hard to differentiate, and expensive to scale, with hundreds of players including RIAs, banks, brokers, and asset managers all competing for nonprofit and UHNW discretionary mandates. It’s hard to cut through the clutter.

To quote one industry veteran: “As more and more thoughtful investors recognize the power and promise of OCIO, it’s time to review its three primary requirements.

• A Conflict-Free Structure: OCIO requires a structure that is conflict-free and truly open architecture with no products or hidden corporate agendas to confound decision making.
• Purchasing Power: OCIO requires sufficient purchasing power to pay for talent and support to fully exploit global complexity, noise, and opportunity.
• An Investment Management Culture: OCIOs require a point-accountable, investment management culture.”

Our advice? When looking for an OCIO, it pays to be thorough. Once a family or foundation (or pension fund, healthcare system, insurance company, etc.) commits to a partner, an OCIO relationship is not easily undone.

Charles Skorina

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(download PDF directory only)

Outsourced Chief Investment Officer

(OCIO) Directory, Fall 2025

“People don’t know what they want until you show it to them.” — Steve Jobs

The late David Swensen, Yale’s formative chief investment officer, found value in dark corners, those unknown managers and overlooked opportunities Heather Gillers referred to in a recent WSJ article. But there hasn’t been much new in money management since Mr. Swensen wrote the playbook.

Whether non-correlated, factor-based, or managed TPA, when we do our ten-year return studies most institutional portfolios look and act the same.

So, here’s a question. If most investment managers think alike, what’s to keep AI and algorithms from taking their jobs?

Barter to Bitcoin

Disruptive technologies and blockbuster products, computers and ETFs, come around maybe once every fifty years, so the time seems ripe for the next big thing — those creative convulsions Professor Clayton Christensen warned about.

Here’s a piece that caught our eye, an excerpt from an article on AI, crypto, and seismic change by Caltech grad and tech founder Ryan W. Sinnet, PhD. A vignette about horses.

In 1920, America reached peak horse: 25 million animals powering the nation’s economy.

But the end had already begun in the cities. In 1910, New York City housed 128,000 working horses, according to the NYC Department of Records. They pulled carriages, delivered milk, hauled freight.

 Every morning, thousands of horses trudged through Manhattan streets, their iron shoes striking cobblestones in a rhythm that had echoed through cities for centuries. Smart money owned stables, carriage companies, hay distribution networks. The horse industry wasn’t just big—it was civilization itself. Unthinkable to replace.

Yet by 1920—even as rural America reached peak horse—New York’s horse population had already collapsed to 56,000, more than half gone in a single decade. The transformation was already accelerating.

 By 1912, New York City had 38,000 motor vehicles on its streets, and the automobile age had clearly arrived. By 1917, the last horse-drawn trolley made its final trip.

The entire ecosystem that supported horse labor—stables, blacksmiths, harness makers, feed suppliers, auction houses—didn’t evolve or adapt. It vanished. The 25 million horses that powered America in 1920 plummeted to just 3 million by 1960.

Those horses never came back.

Relationships matter

Chatbots, robo-advisors, Zoom, and the cloud are now obligatory parts of the financial landscape. Generations born in the internet age seem fine without the human touch as long as their assets are globally accessible, secure, and earn enough to pay the bills.

But that’s on the retail side. These “digital natives” may be inured to “Tilly Norwoods” and “Schwab Intelligent Portfolios,” but how about foundations, endowments, and UHNW families with large diverse holdings?  Might they still want a human at the helm?  Someone who “understands their needs and speaks to their sensibilities” as Ken Tsuboi, chief investment officer at McMorgan & Company describes constructive client engagement.

Successful wealth stewards embrace the goals, aspirations, lifestyle preferences, and risk tolerances of their clients. Kathryn George, Partner, Brown Brothers Harriman points out that “Wealth is never just about money. It’s intimately intertwined with relationships – between generations, between values, and between expectations.”

We tallied a record high $4.865 trillion dollars in outsourced assets in our last OCIO report. Rich Nuzum at Franklin Templeton counts the “rise of private market alternatives; the global war for in-house investment talent; the data, digital and technology arms race; and the increasing number of asset owners questioning the need to manage investments in-house” as major factors driving growth.

Funds and families with two billion or more may have the means to field internal investment capabilities, assuming they have the time and patience to build, staff, monitor, and maintain such a business. But for those with less regal sums, outsourcing the complexities and risks to professionals they trust is an effective way to keep their commitments and secure their legacy.

Final thoughts

According to Altrata’s World Ultra Wealth Report 2025 “the total net worth of the UHNW class rose by 6.7% to $59.8tn at the end of June 2025 (and by 11.6% in 2024) – a figure double that of the annual GDP of the US.”

That’s encouraging. After all, managing money is one of America’s key competitive advantages. And we recruit the managers who manage the money.

And yet . . . I can’t help but worry.

“Not because AI does everything better, but because it does enough things cheaply enough that the economics become undeniable” as Dr. Sinnet contends.

About twenty years ago, I had lunch with the EVP of Equities at a major west coast mutual fund company. A fellow University of Chicago grad, he was smart, savvy, and successful, but the lunch ended on a sour note when I remarked that Index funds and ETFs might be a problem down the road for the full-load fund business. Right comment, wrong company.

“I obviously had no idea what I was talking about,” he snapped. “These ETFs are a gimmick with a niche future at best. Clients want the human touch and always will. And they will continue to pay for it.”

Not so long after our lunch he left the firm – retired early I heard – and that giant fund warehouse has had a bumpy ride since.

As Andy Grove, the former CEO of Intel used to say, “only the paranoid survive.” Me? I keep looking over my shoulder.

— Charles Skorina

What’s worth doing is worth doing for money. — Gordon Gekko (Michael Douglas) Wall Street

What do investment professionals earn at nonprofit institutions? We recruit these executives for a living, so we avidly track their pay and performance.

In this letter we highlight the compensation of one-hundred twenty-eight chief investment officers and staff at private US foundations and tie their pay to five-year performance.

Our goal is to give boards, CEOs, and CIOs a useful set of benchmarks as they consider what to pay their investment executives.

FoundationMark

As always, when it comes to foundation research we draw on the impressive data set from our good friend John Seitz, CEO of FoundationMark.

We think his research and rankings are excellent companions to our pay and performance studies, of interest to asset owners and all purveyors of investment products and services.

The Business of Philanthropy

While college endowments garner most of the media attention, foundations embrace a much larger market, both in numbers and assets.

Over the last thirty years the number of foundations has tripled from about 40,000 in 1995 with assets of $373.4 billion to nearly 120,000 holding $1.6 trillion today. One report puts total nonprofit assets at over $8 trillion dollars.

By comparison, the 2024 NACUBO-Commonfund Study of Endowments lists 658 U.S. colleges and universities and affiliated foundations with $873.7 billion in assets.

Nonprofits are major employers in almost every state. Did you know that:

• The nonprofit workforce is 12.5 million strong, making it the third largest “industry” in the U.S., outdistancing all but two major for-profit industries in its contribution to state employment and payrolls.
• Nonprofit employment is dynamic, growing more rapidly over time than overall employment.
• Nonprofit wages actually exceed for-profit wages in many of the fields where both sectors operate.

(How does foundation pay compare to Wall Street money, you ask? These Heidrick & Struggles comp surveys on alternative asset managers and private equity professionals suggest it’s a toss-up.)

Performance

Unlike academia with its traditions of open access and publish-or-perish, foundations have no impetus to reveal or publish much of anything, particularly investment data, and few do, less than .01%.

As Professors Matteo Binfare and Kyle Zimmerschied found while drafting a paper on foundation investing: “There is little research to date on the investment performance of private foundations.”

Undaunted, Mr. Seitz and staff have developed a system which tracks and estimates the investment performance of most foundations in the nonprofit universe. But please keep in mind that these numbers are estimates based on 990 data, not public pronouncements from the foundations.

Moreover, there’s a long lag – a year and a half to two years – before compensation data is publicly available. Hence, the comp numbers in our table are mostly as of December 31, 2023, with a handful from March and June 2024.

Pass the gravy

Charity often comes down to semantics.

Large private foundations pay their employees well, and for the most part they provide substantial public benefits. The more foundations earn, the more they give away. That’s how the system is supposed to work.

But there are exceptions. We wrote about one case a while back of too much charity staying at home. And Professors Nathan Born and Adam Looney assert in “How Much Do Tax-exempt Organizations Benefit From Tax Exemption?” (pg.8) that a few nonprofit beneficiaries seem reluctant to share their tax-free bounty.

The OCIO Option

The OCIO industry has grown dramatically over the last forty years for good reason, managing institutional money is expensive. It takes time and resources to build a competitive, institutional-grade investment office, and staff compensation alone can run seventy-five to eighty-five percent of total costs.  

The top three foundations in our table, for example, disclose investment staff comp of $13,438,547 for the Hewlett, $12,400,949 for the Ford, and $11,133,746 for the Moore, but that’s only for the highest paid employees. The actual investment office headcount and payroll is often much larger.

OCIOs such as Hirtle Callaghan, Blackrock, Brown Brothers Harriman, McMorgan & Company, Third Lake Partners, et al, have spent decades building their platforms and working with organizations and families with like-minded missions, objectives, and challenges.

These full-discretion investment managers offer the proven performance of in-house investment staffs and the process and structure to cope with operational and regulatory headaches, all at a reasonable price.

For most nonprofits under $1 billion AUM, and for many with more, outsourcing is the better choice.

Pay and Performance at Private Foundations

Highest Paid Investment Staff Members

(Pay and Performance – Table)