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Outperform: Inside the Investment Strategy of Billion Dollar Endowments


"University endowment managers have generally outperformed the market benchmarks. However, their knowledge has not been well documented in any book. This book fills that gap and should be of significant help to all those who want to learn from extensive interviews with a number of endowment managers."—PREM JAIN, McDonough Professor of Accounting and Finance, Georgetown University

Learn how higher education's largest endowments consistently achieve higher investment returns than the overall market.

The Chief Investment Officers who oversee the top academic endowment funds manage over $400 billion in total assets. Over the last ten years (1999–2009), large endowments returned an average of 6.1%, compared to the S&P 500 index average of –2.22%, an outperformance difference of over 8%. With the recent sharp economic downturn, and a decade of inflation-adjusted flat returns in the overall equities market, institutional and individual investors alike are looking to endowments for proven strategies for improving the performance of their portfolios. Outperform: Inside the Investment Strategy of Billion Dollar Endowments interviews top CIOs from leading endowments, to detail how they consistently outperform the market, what they predict for the coming years, and how small investors can employ their investment philosophies.

JOHN BASCHAB is Senior Vice President at Technisource, a leading business services company and a division of SFN Group. He was a cofounder and president of consulting services at Impact Innovations Group before successfully selling the company to Technisource in 2005. After receiving his MBA with honors from the University of Chicago Booth School of Business, Baschab worked as a technology consultant to Fortune 500 companies in the Chicago office of management consultancy Booz & Company. He began his career at AT&T following graduation from the University of Alabama. John is an adjunct professor at Southern Methodist University.

JON PIOT received a bachelor of science from Southern Methodist University and an MBA from Harvard Business School. He began his career at Andersen Consulting (now Accenture) and provided consulting services to Fortune 500 companies at management consultancy Booz-Allen Hamilton. As co-founder and CEO of Impact Innovations Group, Jon led the sale of Impact Innovations to Technisource in 2005 and was part of the executive team responsible for the sale of Technisource to Spherion Corp. He is currently the managing partner at Redpoint Capital, a private equity investment group, and an adjunct professor at Southern Methodist University.

Preface ix

Acknowledgments xiii


Chapter 1 Academic Endowments Overview 3

The World of Endowments 4

History of Endowments 6

Academic Endowments in the Context of the Investment World 7

Large Academic Endowments 7

Implications for Individual Investors 17

Summary 19

Notes 20

Chapter 2 Historical Endowment Performance 21

Investment Returns 22

Asset Allocation 28

Summary 30

Notes 31

Chapter 3 A Look Inside Endowments 33

Endowments Are Different 33

Endowments Define Asset Classes Broadly 35

Endowments Achieved a One-time Sophistication Improvement 36

Endowments Are Nimble 36

Endowments are Evaluating Approaches to Managing Tail Risk 37

Endowments also Manage Working Capital 38

Endowments Manage Liquidity Carefully 39

Endowments are Changing their Approach to Performance Measurement 41

Summary 41


Chapter 4 Jonathan Hook, Chief Investment Officer
The Ohio State University 45

Chapter 5 Guy Patton, President and CEO
The University of Oklahoma Foundation 57

Chapter 6 Bruce Zimmerman, Chief Investment Officer University of Texas Investment Management Company 69


Chapter 7 James H.C. Walsh, Chief Investment Officer Cornell University 81

Chapter 8 Sally J. Staley, Chief Investment Officer, and Anjum Hussain, Director of Risk Management Case Western Reserve University 95

Chapter 9 Mary Cahill, Vice President of Investments and Chief Investment Officer
Emory University 113

Chapter 10 Don Lindsey, Chief Investment Officer
George Washington University 125

Chapter 11 Scott W. Wise, President
Rice Management Company 141

Chapter 12 James (Jim) Hille, Chief Investment Officer
Texas Christian University 153

Chapter 13 Jeremy Crigler, Chief Investment Officer
Tulane University 167


Chapter 14 Sandy Urie, President and Chief Executive Officer, and Celia Dallas, Co-Director of Research and Managing Director
Cambridge Associates 181

Chapter 15 Lyn Hutton, Chief Investment Officer
Commonfund 199

Chapter 16 Thruston Morton, CEO and Chief Investment Officer
Global Endowment Management 217

Chapter 17 Mark W. Yusko, CEO and Chief Investment Officer
Morgan Creek Capital Management 231

Chapter 18 Rafe de la Gueronniere, Principal
New Providence Asset Management 247

Chapter 19 Bob Boldt, Chief Executive Officer
Boldt Ventures 267

Conclusion Concepts for Individual Investors 281

Lessons for Individual Investors 281

Trends 288

Predictions for Endowments 292

Summary 294

Glossary 297

About the Authors 307

Index 309