In Focus: Investment Management
From the March 2011 issue of Our Moment, the UConn Foundation's e-newsletter.
Of all the words used to describe the strategic role that private support plays at UConn, “endowment” is perhaps both the most confusing and important.
For the quarter ending December 31, 2010, the University’s endowed assets were valued at $276 million (and total investments equaled $337 million), but what does this mean?
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Pooled Investment Asset Allocation (As of December 31, 2010) |
Asset Growth (As of December 31, 2010) |
Simply put, $276 million is the present market value of the private gifts in more than 1,200 separate funds established by donors at The University of Connecticut Foundation. Unlike non-endowed gifts, which may be spent by the University in their entirety at any time, an endowed fund is invested by the Foundation to create a lifetime of revenue for the purpose established by the donor.
The role of managing this institutional wealth falls to a “three-legged stool” of the Foundation’s internal investment staff, the Foundation’s Board of Directors and outside investment consulting firms. Together, this group’s success was responsible for the Foundation being named as a “top small non-profit of the year” by Institutional Investor magazine in 2010 (link).
Kevin Edwards ‘85 CPA/CFA (photo, right) oversees it all. Edwards joined the Foundation in 1997 as an investment analyst and now serves as the vice president of finance and chief investment officer. He sees both a strategic and a tactical focus in his daily work.
“Simply put, the larger our endowment, the less dependent the University is on government funding,” he explains. “The endowment’s value also helps UConn’s national rankings when comparing us to other universities, which in turn attracts better students and faculty and raises our profile nationally. At the same time, we exist to ensure support in perpetuity for the issues our individual donors are passionate about.”
Ultimate responsibility for the endowment resides in the Foundation’s Board of Directors (link) and more specifically, its investment committee, comprising alumni who are all senior investment professionals in their own careers. Bringing their specialized knowledge to the table, the committee remains focused on its mission: ensuring the Foundation invests its donors’ money wisely and helping the University succeed.
Edwards and his two staff manage the day-to-day operations, monitor investments and interview fund managers. Perhaps most importantly, Edwards says that his staff also serves as an idea-generation group, developing proposals for new investments, which are then passed on to consultants for vetting and review before being presented to the investment committee.
Those consultants, Wilshire Associates and RYSE, provide “an extension of our staff,” Edwards believes, by offering outside perspectives on market trends, comparable investment decisions from similar clients, and an ongoing evaluation of the level of risk in the Foundation’s portfolio.
Balancing risk and return cuts to the core of any investment portfolio, and is a fundamental, driving issue in the successful management of an endowment.
“My biggest focus is ensuring long-term growth, not chasing quarterly returns,” Edwards says. This means that the Foundation doesn’t solely aim for fund performance, but fund performance weighed against the risk of an investment strategy. To keep pace with cost increases, the endowment must grow enough that it can provide the same (or a greater) proportional level of support in 50 or 100 years for a particular donor fund as it can provide today.
“We want an all-weather portfolio. And that means when markets are good, we’ll see an increase, but probably not the same as what others are seeing. And when markets are bad, like with the tech bubble or the 2008 recession, we’re not going to be hit as hard.”
His work in growing the endowment is challenged by the relative newness of fundraising at UConn—it was only in the late 1990s that the endowment rose above $100 million, a very small amount for a university of UConn’s stature. The endowment remains small today compared to UConn’s peers, who often have endowments of $1 billion or more. And the portfolio asset allocation, once rooted disproportionally in equities, now pulls from more than a dozen asset classes and strategies, such as real estate and innovative new opportunities like pharmaceutical drug royalties. This diversification, carefully managed by Edwards and the “three-legged stool” over the past decade, helps maintain a focus on long-term growth.
“I feel that we have all the pieces in place that we need for our investment strategy,” he says. “We have to make sure that we’re keeping our eye on what we’re trying to accomplish: a consistent lifetime of support for the University from a donor’s gift.”
For more information about the Foundation's endowment management, please contact:
Kevin A. Edwards, CPA/CFA
Vice President of Finance and Chief Investment Officer
860.486.1203
INVESTMENT STAFF
Assistant: Hallie Wilson, Vice President of Finance and Chief Investment Officer 860-486-2965
Tim Nguyen, Director of Investments 860-486-4386
Shahid Farooqi, Investment Analyst 860-486-2912
THE "IN FOCUS" SERIES ABOUT THE UCONN FOUNDATION:
