Managing Endowments in a Crisis
For decades, university and foundation endowments were regarded as unexciting. They invested in Treasury bills, real estate, and maybe some Blue Chip stocks. This changed as investment managers such as Yale’s David Swensen took a new approach to endowments, seeking greater diversification and moving into private equity, real assets, hedge funds, and other asset classes. For many institutions that used this model, the results were staggering. Under Swensen, the Yale endowment saw 20 straight years of positive returns, averaging more than a 16% annual growth rate.
The financial crisis of the last year has forced a reevaluation of both short- and long-term strategy for these funds which support vital institutions and programs.
Numerous Yale SOM graduates have become leaders in the field of endowment management, and on April 17, four of them returned to campus to discuss their experiences guiding endowments through tumultuous times.
The participants in the program were Betsy Eismeier ’80, vice president for finance and administration at Vassar College; Paula Volent ’97, vice president for investments at Bowdoin College; Jane Mendillo ’84, YC ’80, president and CEO of the Harvard Management Company; and Ellen Shuman ’84, vice president and CIO for the Carnegie Corporation of New York. Dean Sharon Oster led a wide-ranging discussion that touched on how they faced the crisis, whether they’ve fundamentally changed their investment approach, and whether a new model will emerge along with a new financial industry.
Video Excerpts from Alumnae Endowment Panel
Ellen Shuman discusses where the Carnegie Corporation’s asset allocation stands as of the
end of 2008. (7:38)
All four alumnae discuss the cost structures of
their institutions, whether portfolios were not
liquid enough to face a financial crisis, and how they reacted to the recent crisis. (8:26)
All four alumnae discuss how they are changing their investment approaches, with an emphasis
on creating more liquidity in their portfolios. (6:58)
Jane Mendillo discusses the history and strategy
of the Harvard Management Company. (3:41)
Paula Volent and Jane Mendillo discuss lessons learned and where one might invest. (1:33)
Ellen Shuman discusses David Swensen’s book Pioneering Portfolio Management and the Endowment Model of investing. (0:58)