Archive for the ‘Newsletter’ Category

David F. Swensen, End of an Era

05 / 10 / 2021
by Charles Skorina | Comments are closed

Endowment Returns Update: More to the Story

David F. Swensen, End of an Era

-- Lux Et Veritas

David F. Swensen, Ph.D., Yale '80 and chief investment officer Yale endowment, died May 5th, 2021.

Mr. Swensen was a 32-year-old kid in 1985 with no endowment experience and a couple of years on Wall Street when William Brainard ’62 Ph.D. and Yale provost hired him as the university’s first endowment investment manager.

When Swensen accepted the position at Yale, most endowments held US stocks and bonds. That’s it!

His iconoclastic views on markets and investment opportunities led to a fundamental shift in how and where institutional investors sought to make money.

The conceptual groundwork had been laid for Mr. Swensen’s investment heresy in 1967 by another Yale alum, McGeorge Bundy A.B. ‘40, then-president of the Ford Foundation.

In the Foundation’s ‘67 annual report, President Bundy noted that “…the true test of performance in the handling of money is the record of achievement, not the opinion of the respectable.”

Mr. Bundy commissioned influential studies attacking the old assumption that the “prudent man” rule of personal trust law applied to management of endowment and foundation funds.

Along with the dissemination of modern portfolio theory, these initiatives cleared the path for Swensen’s sophisticated and non-traditional portfolio management style at Yale and, in the years that followed, other Ivy schools.

Today, thanks to Mr. Swensen's "Pioneering Portfolio Management", endowment investment chiefs are the ultimate long-term, strategic investors.

They have an infinite investment horizon, a global playing field, and can invest in anything anywhere - within the broad policy limits set by their institution.

He will be missed and hard to replace.

Swensen’s investment portfolio and returns are baked in for at least five more years. But good management starts with good succession planning.

As I mentioned to Bloomberg News, culture and institutional memory play an important role in top quartile investing. And in the case of Yale, we should add “tradition.”

Our first headhunting calls would be to two of the top CIOs on our list; 47 years old MIT CIO Seth Alexander ‘95, and Stanford University’s CIO Rob Wallace ‘02, 55 years old.

Both have years remaining in their careers, stellar track records, and strong ties to the school and the Yale investment office (YIO).

If not Messrs. Alexander or Wallace, well there’s plenty of Yale alumni and YIO talent to pick from.

See the YaleNews' touching "In Memoriam", next article.


Updates and Erratum

We have updated our charts to include more schools and highlight more women CIOs among the top performers.

Also, the University of Virginia earned ten and five-year returns of 10.1% and 6.6% (not 8.10% and 5.80% as we first reported) for June 30, 2020.

We have made the changes to our charts and added Emory University, Phillips Academy Andover, Grinnell College, University of Toronto, and University of Western Ontario.

See: Endowment Returns 2020, Strange Days for updated charts and rankings.

-- Charles Skorina

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Scott Malpass and Notre Dame: Keeping the faith for 32 years

03 / 31 / 2021
by Charles Skorina | Comments are closed

The most notable CIO-centric event of 2020 in the endowment world was undoubtedly the retirement of Scott Malpass as chief investment officer at Notre Dame.

Mr. Malpass was just a dewy 25 years old and relatively inexperienced when Notre Dame recruited him as “assistant investment officer” in 1988.

He was already effectively in charge that year, but decorously waited for his predecessor to retire in 1989 to officially take the CIO title.

In 2020 he punched out as smoothly as he had punched in.

His successor, Michael Donovan, had been Mr. Malpass’ wingman for 20 years. They had been undergraduate classmates (and roommates) in ND’s class of 1984, making them both about 58 in 2020.

Although he is ferociously devoted to his school, Mr. Malpass chose not to hang on until standard retirement age. Instead he passed the baton early enough to leave plenty of career runway for his colleague and successor.

Badly executed successions can be ruinous in institutional investing. The examples have been too notorious to list. This is how the pros do it.

Mr. Malpass had 32 years in harness when he stepped down last year and was the longest-serving endowment CIO we know of, with the prominent exception of Yale’s David Swensen, 35 years and counting.

Longevity is great (at least for the incumbent) but it’s performance that counts. And, although the Yale endowment is far more prominent, Notre Dame’s performance has been remarkably good, and only very slightly behind the top northeastern schools. Casual observers may have missed that.

Mr. Swensen has earned his fame. But we suspect that the attention paid to Yale and the relative inattention to Notre Dame has much to do with the regional chauvinism of the financial press.

For the media, a Catholic college in Indiana will never have quite the cachet of the Ivy League.

Take a look at our 5-year performance numbers below. Allowing for ties, the 5-year return ranking is:

No. 1: Brown (9.8)

No. 2: MIT (9.0)

No. 3: Rockefeller/ Bowdoin (tie) (8.5)

No. 4: Yale/ Dartmouth/ UTIMCO (tie) (7.8)

No.  5: Notre Dame/ Princeton/ Williams (tie) (7.7)

By this reckoning, the recent performance of the Notre Dame Model is just a whisker behind the Yale Model. In fact, Notre Dame beat Yale in 3 of the last 4 years.

This is so interesting that we thought we should reach back to our longer-term Yale versus Notre Dame dataset.

Twenty years is a nice, round number, and we can’t think of any other such pairing that could put the same two long-serving CIOs head to head. But we pushed back 21 years to capture the Dotcom Meltdown beginning in the second half of that fiscal year.

Notre Dame versus Yale endowment performance

FY 2000-2020

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Building the Next OCIO Powerhouse

02 / 18 / 2021
by Charles Skorina | Comments are closed

Growing a discretionary asset management or investment advisor business is tough.

We have yet to see an independent Outsourced Chief Investment Officer firm reach $100 Billion AUM through organic growth.

Most of them will never even reach $20 Billion.

Of the thirteen firms managing $50 billion or more on our annual OCIO list, only one – Alan Biller and Associates – launched as a pure-play OCIO and consulting start-up.  And they’re just over the $50 Billion line.



Over $100bn AUM



(as of 6-30-20)



Russell Investments






Goldman Sachs


AON Hewitt


Willis Towers Watson


State Street Global Advisors







$50bn to $100bn AUM



(as of 6-30-20)

Northern Trust


Wilshire Associates


JP Morgan Asset Mgmt




Alan Biller and Associates




Total OCIO assets have been growing briskly, at more than 15 percent annually (In the 12 months July 2019 to June 2020).Most except Biller began as financial mega-firms long before OCIOs were even invented. Several have roots stretching far back into the nineteenth century. JPM goes all the way back to the 1800s!

Independent OCIOs and RIAs have not been able to grow their way into this select company, and probably never will.

Why is this?

But it’s scattered among dozens of relatively small firms.

The solution seems obvious: Do it the old-fashioned way. Grow by acquisition and aggregation. Buy, sell, and merge firms. That’s how the mega-financials have done it.

It’s a well-understood historical process. Railways, utilities, steelmakers, banks, brewers, hotels, airlines all grew like this.

The boffins at Harvard Business School call it the Industry Consolidation Lifecycle. (See:  It’s easy to see after the fact, but much harder when we’re all floundering through it in real time.

And yet, for most OCIOs under $50 Billion, there seems to be a deep aversion to mergin’.

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Northwestern Lands CIO Amy Falls

02 / 02 / 2021
by Charles Skorina | Comments are closed

Almost exactly ten years ago we reported with great interest Amy Falls’ move from Chief Investment Officer at Phillips Academy (aka Phillips Andover) to the CIO job at Rockefeller University.

Five years ago we interviewed Ms. Falls in Manhattan and marked her as someone to watch when a top-tier endowment position opened up. (See “Coffee with Amy” below.)

Now, it has just been announced that she’ll be moving on to Northwestern University.  She’ll lead their $12.2 billion endowment, succeeding William McLean as CIO.

Clearly she impressed Northwestern’s search committee by leading the Rockefeller endowment to consistently excellent performance.

But not everyone may have noticed just how excellent it was.

By our reckoning she is in the top 10 among all US endowments over those ten years – ranking ninth out of ten to be exact.

Paula Volent at Bowdoin ranks first for 2011-2020, with 11.6 percent.

All the other endowment big guns (MIT, Yale, Dartmouth, Princeton, Williams, Notre Dame, Brown, Carnegie Mellon) and their renowned CIOs are strung out between 11.4 and 9.5 percent for ten years.  Ms. Falls squeezed past Debbie Kuenstner at Wellesley with 9.6 percent.

But she was even more impressive in the second half of her decade at Rockefeller.

As she increasingly put her own stamp on their allocations, she surged even closer to the top of the pack.

Over the last five years, 2016-2020, her return tied with Paula Volent at Bowdoin for third-ranking among all US (and Canadian!) endowments with 8.5 percent.  They were surpassed only by Brown and MIT, with 9.8 and 9.0 percent, respectively.

As she has moved up to head bigger funds her comp has grown proportionately.

She made about $800K at Andover.  At Rockefeller her pay rose to about $1.5 million by 2020.  And now, at Northwestern, we estimate that her comp will be well north of $2 million.

Amy’s Excellent Network

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Joseph Boateng: Investing for Children in Need

11 / 09 / 2020
by Charles Skorina | Comments are closed

Our November letter looks at one of the country’s biggest and most effective operating foundations – the $2.5 billion AUM Casey Family Programs (CFP) in Seattle – and Joseph Boateng, the man who manages the money.

An “operating” foundation uses most of its resources to run its own, internally-managed charitable programs. Among the 86,000 foundations in the U.S. totaling $715 billion in assets, almost all are grant-makers. Only 5 percent run their own charities as CFP does. This has implications, as we shall see, for their investment program.

In 1907, 19-year-old Jim Casey and his 18-year-old pal Claude Ryan between them had one bicycle and $100 borrowed from a friend. They set up the American Messenger Company, operating out of a hotel basement in Seattle. The automobile was still a novelty and aviation barely existed. His brother George and a few friends worked as messengers.

The tiny bike-messenger company grew into mighty UPS, with an enterprise value of over $100 billion and which now moves its packages on its own aerial fleet (UPS Airlines), flying hundreds of giant jet freighters all over the globe. Not to mention 96,000 trucks, vans, tractors and even motorcycles. Alas, no bikes.  

When Mr. Casey died in 1983 he’d turned his borrowed $100 into a personal fortune of $100 million. Most of that went into the CFP operating foundation and the related grant maker Annie E. Casey Foundation. The former is still sited in Seattle, while the latter – also focused on child welfare – is in Baltimore.

For any of our readers who lives have been touched by foster care, you know Casey. 

President and CEO William C. Bell, Ph.D., a former New York City commissioner for Child Services, joined CFP in 2004 and became CEO in 2006. A year later the Casey Board recruited Joseph Boateng to work with Dr. Bell as the foundation’s first and only CIO, bringing the investment portfolio inhouse. It had been previously managed externally by Russell Investments.

CFP’s charities, despite their altruistic aims, have budgets, expenses, and many commitments to meet, like any big business. But revenue comes through a single pipe: investment returns on Jim Casey’s original endowment.

For CFP, any unexpected shortfall in investment revenue means either a cut in programs for kids, or an invasion of the corpus. Both are unacceptable.

For fourteen years, Mr. Boateng has managed to produce that steady income while walking an investment tightrope.

Kim Lew, the new CIO of Columbia University, previously managed investments at the Carnegie Corporation, another major private foundation. As she told us in our recent interview:

A private foundation is not a university endowment. We don’t have rich alumni we can go to for help if we take an unexpected haircut.  We have constraints which demand close attention to liquidity. That means we can’t lay out sixty to seventy percent of the portfolio in private equity, venture capital, timber, and other assets which might take years to sell.

Joseph Boateng, an American Success Story

Mr. Boateng was born in the west African republic of Ghana, son of a prominent local leader. 

There were early signs of his business acumen. During his student leader days at the University of Ghana, Joseph launched a number of innovative programs for small business owners including education sessions and seminars on accounting, business development, and cash management.

AIESEC International even gave him an award for the most Innovative Program of the Year Award at their Annual International Congress in Innsbruck Austria in 1987.

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