Foundation & Endowment Money Magazine 11-30-2009

DECEMBER 2009 BUCKEYES EXAMINE DISTRESSED, REAL ASSETS
VOL. XII, NO. 12
The Ohio State University is eyeing possible investments in distressed
SMU Seeks Investment debt and real assets for its roughly $1.8 billion endowment. The Buckeyes
Director have not carved out a specific target but typically look to invest around
Southern Methodist University is $20 million per fund, explained CIO Jonathan Hook. The Columbus-
searching for a director of investments based endowment is open to distressed debt trading and distressed-for-
to help oversee its private investments. control investment strategies, as well as a wide variety of real assets,
See story, page 2 including commodities, energy and farmland.
Jonathan Hook
At Press Time The school is keen on distressed opportunities because there are still
Lebanese School Hires CIO 2 (continued on page 16)
Investment Committees
Overrate Performance 2 NUNAVUT PONDERS GLOBAL GROWTH MANDATE
The C$1.1 billion Nunavut Trust is planning to review long-only equity investments in the
Searches second quarter and could look for a global growth manager. The fund invests 21% in global
South Carolina Looks To equity but has been underweight for the past two years, said Andrew Campbell, ceo.
Emerging Marts 4
One option is a quant manager because its other managers are fundamentally driven, said
Ohio School Ponders Private Equity 4
Campbell. The size of the potential mandate has not yet been determined.
Miami Dade Examines Commodities 5
The fund is interested in active management. It recently converted a Canadian fixed-
Longwood Eyes Consultant 5
income mandate managed by Doherty & Associates to active from passive, said Campbell.
People (continued on page 16)
EnTrust Taps NEPC Consultant 6 Passport Play
Westfield Hires Marketer 6
INTERNATIONAL EQUITY
Marketing
Commonfund Launches Cash Strat 7
SEARCHES HEAT UP
Ottawa Shop Preps Portable Alpha 7 Nonprofits are turning an eye overseas as international
Morgan Creek Starts Funds 8 equity search activity has increased by 42% over the past 12
months. There were 27 searches over the past year versus 19
Departments for previous 12 months, according to FEMM sister database
Fund Focus: The Culver Academies 11 iisearches. Among those searching or pondering the play
Search Directory 14 now are the Wyoming State Treasurer’s Office (see story,
(continued on page 16)

COPYRIGHT NOTICE: No part of this publication may
NONPROFITS EYE INDEXED EQUITY
be copied, photocopied or duplicated in any form or by Indexed equity has been gaining steam again following active
any means without Institutional Investor’s prior written
consent. Copying of this publication is in violation of the managers failing to deliver alpha over the past year. FEMM
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attorney’s fees. Copyright 2009 Institutional Investor, director of risk management at Case Western Reserve University; Patrick Burke, head of the
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Check www.foundationendowment.com during the week for breaking news and updates

Foundation & Endowment Money Management www.foundationendowment.com December 2009

Lebanese School Taps CIO
Lebanese American University has hired David Grosner from Hewitt Associates
as its senior investment officer for its roughly $330 million endowment. Grosner
EDITORIAL PUBLISHING
was a principal and senior consultant at the firm and also co-chaired the TOM LAMONT GRAHAM CHITTY
investment manager research group. The university’s main campus is in Beirut, Editor Publisher
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STEVE MURRAY
but Grosner is based in the school’s New York offices. Grosner said he joined the Deputy Editor RONDA DIMASI
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LAU’s hire follows the lead of another Middle Eastern education institution, (212) 224-3297
VINCENT YESENOSKY
Senior Operations Manager
King Abdullah University of Science and Technology. The new Saudi school MARK FARO (212) 224-3057
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Southern Methodist University is searching for a director of investments to help LOUIS POPE DAN LALOR
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Searches
Gamecocks Eye Emerging Markets UCONN Ponders International
The University of South Carolina Foundations is examining a Equity Boost
possible first-time allocation to emerging market equity for its
The University of Connecticut Foundation is looking to
$230 million portfolio. The Gamecocks are considering a 5%
boost the international equity allocation for its roughly $250
allocation and should decide on the move within the next three
million portfolio. The Huskies’ long-only equity investments
to four months, said Russell Meekins, cfo. South Carolina
are split 2:1 U.S/International, and the Storrs, Conn.-based
already invests 15% in international equity, which has some
school wants to reverse that ratio, said Kevin Edwards,
exposure to emerging markets, but this would be the first
associate v.p. of treasury services. UCONN is considering
dedicated investment, he added.
whether it wants active, passive or some combination of both
The Columbia-based university is considering emerging
approaches, he added.
market equity because it would provide further diversification to
The move is being contemplated now because there are greater
the portfolio, said Meekins. The school plans to rely on the
growth opportunities outside the U.S., said Edwards. Specifically,
recommendations of its consultant, Fund Evaluation Group, to
a weaker dollar and increased manufacturing growth overseas
whom all manager inquiries should be directed, he explained.
makes international equity more appealing, he explained.
The Gamecocks also recently invested $10 million in a fixed-
income investment managed by TCW. The move was
opportunistic, as the strategy invests mostly in mortgage-backed Wyoming Re-Starts International
securities, which are priced well given the market gyrations over
the past year, said Meekins.
Equity Play
The Wyoming State Treasurer’s Office, which oversees several
public endowment funds such as the $7.5 billion Permanent
Ohio Uni Reviews Private Equity Fund, has re-commenced a $1 billion international equity
Oxford, Ohio-based Miami University is evaluating its private search. The state had been planning to issue a request for
equity, venture capital and private real estate investments proposals earlier in the (FEMM, 5/25) but suspended the search
within its $337 million endowment. The RedHawks invest indefinitely in August (FEMM, 9/7). Last month it decided to
15% in private investments but have halted new commitments go ahead with the search and issued a request for proposals that
while the university considers how to proceed following the was due Nov. 2. The delay was the result of internal
market events of the past year, said Bruce Guiot, director of administrative matters, which have since been solved, said
investments and treasury services. “When [the environment] Michael Walden-Newman, cio.
changes, you need to step back and reassess your thesis,” he Wyoming had been using Capital Guardian and Fisher
explained. Miami’s decision is in line with several other Investments for its international equity mandates. The
endowments that are putting the brakes on their private equity incumbents participated in the RFP process; the plan is to select
investment pace (FEMM, 11/2). finalists in the next few months. The state is considering
Miami typically made new commitments each year but has whether it wants to select new managers, to retain the
made none in 2009 because of a changing environment, in incumbents or to use a combination of both new and
particular private equity funds’ difficulty in obtaining leverage for incumbent firms, said Walden-Newman. Also under
strategies, said Guiot. In particular, certain strategies have suffered consideration is whether it makes sense to use active, passive or a
more due to the loss of leverage, such as mega buyout funds and combination of both approaches, he added.
venture capital. “Do we want to be regular commitment makers Once the search is completed, the state plans to move ahead
[just] because calendar has changed?” he asked. with a search for an enhanced large-cap index assignment worth
The RedHawks have mostly used funds of funds to access roughly $250 million. Wyoming also remains keen on adding
private investments, but one possibility under consideration is to more value-added real estate managers. That process is being
invest directly. This would allow the school to target a specific coordinated by its consultant, R.V. Kuhns & Associates, which
strategy, such as something with less leverage, whereas fund of has a real estate group in Chicago, said Walden-Newman.
funds investments are broader and don’t allow the school to Wyoming already invests in two core real estate funds managed
customize its exposure, Guiot said. Graystone Consulting advises by UBS and ING and in value-added portfolios managed by
the endowment. Heitman and TA Associates Realty.


December 2009 www.foundationendowment.com Foundation & Endowment Money Management

North Carolina School Chooses consists of a fund of hedge funds, but that investment is being
liquidated, said Duncan. It is invested in a Russell fund of
Bond Manager funds that is being shuttered, and the school plans to park the
North Carolina Central University has selected Thompson, Siegel returned capital in Treasuries, she added. Part of its review will
& Walmsley to manage a fixed-income assignment. The Durham- be to determine how it can redeploy into hedge funds,
based school has a $15 million endowment, and the fixed-income explained Duncan.
mandate will be roughly $1 million, said Deborah Lane, assistant
vice chancellor for administration, finance, operations and project Miami Dade Ponders Commodities,
management. NCCU is currently in the contract phase with the
manager and hopes to have the Richmond, Va., firm begin Real Estate
managing the money by Dec. 1, she added. Miami Dade College is examining maiden allocations to
NCCU had issued a request for proposals for a bond manager commodities and real estate for its $75 million foundation.
this summer (FEMM, 9/7). The search was the result of a The asset classes were suggested by Consulting Services
donation it received, which has been previously invested in short- Group at a recent board meeting, when it presented an asset
term fund managed by the State Treasurer’s office. allocation analysis, said E. H. Levering, senior vice provost
for business affairs and cfo. The review was part of periodic
due diligence, he added. Levering declined to specify
Florida College To Review Portfolio allocation sizes but noted that managers typically handle
Florida College will review the asset allocation and manager mandates of $5-10 million.
roster for its roughly $12 million endowment. The Temple The Miami school also has a $90 million endowment, for
Terrace, Fla.-based school currently invests about 40% in fixed which Callan Associates serves as a consultant. Callan is also
income, 35% in equities and 25% in alternatives, said Doug reviewing that portfolio and will present its findings either at a
Nerland, development official. The board is planning to review meeting next quarter or sooner, said Levering.
the portfolio as part of an annual process, and there could Miami Dade also recently terminated a small-cap manager
possibly be changes in the next several months, he added. at its September meeting due to underperformance, said
Nerland declined to name the managers, but noted there Levering, declining to name the firm. The money has since
was one active fixed-income manager, with the rest of the been invested in an exchange-traded fund. It has received
bond exposure passive. The equity portfolio consists of recommendations for a replacement but has not yet taken any
mandates run by two firms, while the alternatives slug is action, he noted.
comprised of an older private equity investment and a multi-
strategy fund that invests in several types of income-generating
investments, such as master limited partnerships. Florida
New York College Taps MSSB
College does not use a consultant. Cayuga County Community College Foundation has hired
Morgan Stanley Smith Barney to manage its $10 million
portfolio. The Auburn, N.Y., school had been using
Longwood Seeks Consultant Northwestern Mutual for the past four years, but decided to
The $40 million Longwood University Foundation is issue a request for proposals as part of periodic due diligence,
reviewing its portfolio and conducting a search for a explained Jeff Hoffman, executive director. The move was not
consultant. The Farmville, Va.-based school has been using performance related, and Northwestern was invited to participate
Russell Investments as a manager of managers to oversee its in the re-bid process, he added. Cayuga opted for Smith Barney
portfolio since 2001, but has decided to review other because the firm had a more active investment approach that has
possibilities for due diligence reasons, said Hazel Duncan, cfo. fared well in down markets, said Hoffman.
It considering both the consultant and manager of manager Cayuga started the search process in February, and had
approaches, where a firm manages the whole portfolio with planned to wrap up the search earlier. However, two days before
discretionary authority, she added. Longwood has issued a the board could vote, Citigroup sold its remaining stake in Smith
request for proposals, which is due Jan. 11. It plans to have the Barney to Morgan Stanley. “That was kind of a big change for us
winner begin work on July 1. to swallow,” said Hoffman. Cayuga now feels comfortable with
Longwood is also reviewing the portfolio, which currently the Morgan Stanley transaction and recently inked a deal with
has a 60/40 equity/fixed-income split, with 10% of the equity Smith Barney, he added. The firm is slated to begin managing
slug dedicated to alternatives. The alternatives allocation the mandate before the end of the year.

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People
NEPC Consultant Hops management and specializes in growth equity strategies. The
firm is expected to complete its spin out from parent Boston
To EnTrust Private by year-end.
Bryan Schneider, a senior consultant in hedge
funds at NEPC, is leaving the firm to take a position in research
at EnTrust Capital. Schneider has been with NEPC for nine
Opus Capital Hires Biz
years and focused on fund of hedge funds research. He referred Development Head
calls to President Mike Manning, who said that Schneider will Katrina Howard O’Leary has joined Opus
not be directly replaced, but the firm is appointing new leaders to Capital Management in Cincinnati as a
its alternative research teams who will take on broader roles. Calls manager of business development and client
to EnTrust were not returned. relations. The position is new as the firm is
At NEPC, Senior Consultant Neil Sheth, who joined the firm aiming to grow its assets and broaden client
in June, will now oversee the hedge fund research team, while relationships, she said. O’Leary will be
Senior Consultant Eric Harnish will take on leadership of the working with all segments of the institutional
Katrina Howard
private equity group. Harnish also joined NEPC this summer. O’Leary market, as well as consultants.
They will report to Partner Sean Gill, who oversees all of O’Leary was previously second v.p. at
alternatives research, and work closely with senior strategists for Madison Square Investors (formerly New York Life Investment
hedge funds and private equity, Jaeson Dubrovay and Bill Management) in consultant relations and institutional business
Monagle, respectively. development. She left the firm in April.
Opus has $800 million under management in a small-cap
Lyxor Lands U.S. Marketer value strategy, which has $1.5 billion in capacity. The firm is
Lyxor Asset Management has hired Michael Bernstein to also incubating another equity strategy. O’Leary declined
spearhead marketing funds of hedge funds to U.S.-based to elaborate.
institutional investors and consultants. He is based in New York
and reports to Lionel Erdely, Lyxor’s domestic ceo. A spokesman Nikko Picks U.S. Chief
for Lyxor said the new position was created to help focus on Nikko Asset Management has added to its global team by hiring
building stronger relationship with U.S. clients. Michael Herring to run its U.S. operation. Herring steps into
Bernstein came from Financial Risk Management, a fund of the dual position of cfo and coo in New York. Nikko’s Europe
hedge funds firm, where he marketed hedge fund to North president Charles Beazley said the position has been created to
American clients. A spokesman for FRM did not return calls
ensure the effective management of its U.S. business in light of
about Bernstein’s replacement.
the group’s growing assets under management. He added that the
company’s business model will become increasingly complex as
Westfield Capital Taps Marketer Nikko starts offering alternatives in the U.S.
Boston-based Westfield Capital Management Co. has hired Beazley also indicated that the group’s performance has been
Matthew Coll as a v.p. in marketing and client service. He will resilient and that he holds a positive outlook for their near-term
work with institutional sales, client service and consultant performance. He is expecting new money will be derived from
relations, focusing on the Midwest, said Morton Fearey, director EAFE mandates from large U.S. endowments and foundations,
of marketing and client service. Coll’s position is new as the firm as well as Japanese and Asian mandates.
is expanding its institutional marketing ranks. The firm also Herring will work alongside Hiroko Tsujimura, cio and
expects to add an investment professional to its growth equity global head of alternative investments, and Christina Alfandary,
team by year end, Fearey said. director of marketing, managing U.S. financial, administrative
Prior to joining Westfield, Coll worked at Wellington and operational divisions. Herring has almost 20 years of
Management in London. Over the past 12 years, he held a experience in asset and risk management positions. He joins
variety of marketing and relationship management roles at the Nikko from Bay Harbour Management, where he was cfo and
firm both in Boston and overseas. head of risk management. He has also previously worked at
Westfield has about $11 billion in assets under LaBranche & Co., Ernst and Young and JPMorgan.



Marketing
Commonfund Kicks Off Cash international and global equity manager research, are now
working directly with institutional clients, said spokeswoman
Management Platform Nancy Malinowski. Consultants Michael Tadlock, Tony Brown,
Commonfund has launched a new cash management platform to Eileen Kwei and Diana Greenstone left the firm to join Mercer
replace its Short Term Fund, a university favorite that was forced in September, so Fitzenhagen and DeForrest are, in part, taking
to halt redemptions in autumn 2008. The Treasury Access over their duties.
platform will consist of nine money market funds from three Matthew Schmelzer, who used to focus on domestic equity
fund families, said Jon Speare, managing director of treasury research, has now expanded his role to include international
products. The new platform has been under development for and global strategies, as Fitzenhagen has moved on. The firm
months; the halt of the Short Term Fund left many universities is looking to hire a domestic equity research specialist to
in a lurch because they were unable to tap their cash resources for replace Schmelzer.
private equity capital calls and spending and had to resort to
selling securities holdings (FEMM, 7/27).
Commonfund has already signed on two funds from State
Ottawa Firm Readies Portable
Street Global Advisors for the platform, and expects to have Alpha Strat
an agreement in place with a second fund family in December, Ottawa-based Mountjoy Capital is readying a portable alpha
said Speare. strategy that it is pitching to institutions, including endowments
The firm is pitching the platform to many of the Short Term and foundations. The firm is expecting three allocations from
Fund investors. “The Short Term Fund was [a single] solution; institutional investors—portable alpha and traditional fund of
this is built so you can tailor it to what an organization wants for hedge funds—to be funded for a total of $1.5 billion over the
liquidity management,” he added. Thus far, Commonfund has next few months, said Rene Levesque, founder.
four accounts on the platform, including the University of Portable alpha has taken a beating over the past year, with
Alaska. The school had been an investor in the Short Term Fund. many institutions souring on the concept after getting burned.
Levesque thinks the problem was the underlying hedge funds
Callan Splits Research Chief Role using too much beta, said Levesque. “It was leveraged beta,” he
explained. Those investments were constructed by consulting
Callan Associates has named Inga Sweet and Kelly Cliff as co-
firms that used the wrong criteria to build a portfolio, chasing
leads of its Global Manager Research Group, splitting the
position that was previously held by Greg DeForrest. DeForrest
has moved to Fund Sponsor Consulting at Callan and is now a For More Benefits
senior v.p. and investment consultant.
Both Sweet and Cliff will keep their present jobs. Cliff is cio Visit Our Web Site
of public markets and the firm’s Trust Advisory Group while
Sweet manages the firm’s Published Research Group. Both are • Daily breaking news
also veterans of the Global Manager Research Group.
• News of foundations and endowments seeking managers
A spokeswoman emphasized that cost saving considerations
did not enter into the decision making process. DeForrest’s job • Weekly and month charts of search activity and mandates
was split between Cliff and Sweet to allow for more focused • People moves at foundations, endowments and managers
coverage of the different aspects of manager research, Sweet
• Nonprofit investment trends
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on the operational aspects of research, coordinate manager • Asset Class: Q&As examining asset classes
search work flow and oversee quantitative and qualitative
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consultants. DeForrest and Lin Fitzenhagen, who oversaw



Marketing (cont’d)
top quartile hedge fund managers, said Levesque. By contrast, strategy. He joined Amaranth in 2003 and was the firm’s
Mountjoy’s strategy, which can be employed as a portable alpha number two in Toronto (he traded equities and credit, rather
or straight fund of funds play, is designed to work irrespective of than commodities—the latter was responsible for the firm’s
market conditions without a long-equity bias, he noted. downfall). Before Amaranth, he worked in merchant banking
Marketing portable alpha has not been easy because many and private equity.
investors that faired poorly still rely on the same consultants to
fix the aftermath. “Those who got burned in portable alpha are
turning to them for more help,” said Levesque. “It’s like the
Morgan Creek Rolls Out Funds
Morgan Creek Capital Management, which
machine is broken, so let’s put some tape on it,” he quipped.
is run by former University of North
Mountjoy is employing a marketing technique that relies on
Carolina CIO Mark Yusko, launched a credit
existing investor referrals. Existing clients that refer a new client
fund and an Asian private equity offering.
receive a discount on fees as long as the newcomer stays invested.
The credit offering comes as the firm is
The break equals 25% of the new client’s fees, thus rewarding
making a push into the area, following its
investors for recommending the largest possible prospects,
hiring earlier this year of Sam DeRosa-Farag,
explained Levesque. Mike Hennesy president of credit hedge fund firm Ore Hill
Partners (FEMM, 5/25). The strategy will focus on various credit
Goldman/Amaranth Veteran opportunities, including distressed debt, said Mike Hennessy,
managing director. It’s attractive now because credit strategies can
Sets Up Shop produce equity-like returns with less risk due to the securities’
Michael Ruscetta, former co-head of Goldman Sachs’ special- higher positions in the capital structure, he added.
situations group in Toronto and senior staffer at Amaranth There are also several opportunities in Asia, particularly in
Advisors, has founded RCM Partners and launched its maiden China, said Hennessy. There are opportunities to purchase
hedge fund. The RCM Special Situations Fund will take a quality companies for three to five times EBIDTA, he said.
fundamental bottom-up approach to value- and event-driven Morgan Creek has offices in Beijing and Hong Kong, which
investments such as bridge financing and distressed loans. The gives it an edge to investing in the region, said Hennessy.
fund debuted in late September with under CAD15 million;
Ruscetta said the strategy has the potential to grow to between
CAD500 million and CAD1 billion. Cleantech Private Equity Shop
The fund has a global investing remit but Ruscetta said he will Launches Strategy
focus initially on Canada. “It’s my area of expertise and a market London’s Zouk Ventures has rolled out a second version of its
I know very well,” he said. “Canada is very much a relationship- cleantech private equity strategy. Cleantech Europe 2 held its first
driven market—knowing the players and the landscape definitely closing this month at EUR50 million, and a final close is
gives you an edge when investing here.” He pointed to the planned for next year at around EUR200 million.
natural resources sector as one ripe with opportunities, but said The fund will invest in European companies across three
the fund is industry-agnostic. themed buckets: alternative/renewable energy technologies
Ruscetta has managed the strategy with his own money since (such as solar, wind, biomass, hydro and geothermal); resource-
November 2008. It has returned 64% this year to the end of efficiency technologies (smart grid, transportation, recycling
September, with low beta, he said. The fund will run a relatively and others); and environmental services (waste management,
concentrated portfolio of 20-30 positions, with a typical core long water, carbon capture and storage, etc.). Philip Tomlin, a
position accounting for 5% and a typical short around 2.5%. member of Zouk’s investor relations team, said the fund will
The fund is only available in a domestic Canadian version at prioritise the sectors within each bucket where it sees the
the moment, but Ruscetta has plans to roll out an offshore greatest potential, but would not reveal which sectors these are.
equivalent in the next two months. The fund charges 2/20. At Cleantech Europe launched in 2006 and manages just shy of
least 35% of the incentive fee will be reinvested in the fund, EUR88 million. With the second iteration targeting more than
which Ruscetta hopes will demonstrate his commitment and twice the assets of its predecessor, Zouk intends to invest in
confidence in the strategy. roughly twice as many holdings—around 15 compared with
Ruscetta left Goldman last year and began work on the the first fund’s eight positions—and also to write bigger tickets,



said Tomlin. adding that funds will face additional scrutiny on the source of
The fund charges 2.5/20 fees and is targeting an IRR of 25%. information obtained.
Tomlin declined to provide actual performance for the first fund. The Galleon case has definitely had an effect on conversations,
an event-driven manager in Connecticut said. “In the past, I
might have been more casual. Now there’s a song-and-dance
Galleon Fallout Locks Hedgies’ Lips every time you have a conversation,” he said. “You don’t want to
Galleon Group Founder Raj Rajaratnam’s recent arrest for insider sound smarter than you are in terms of E-mails and phone calls.”
trading has made those in the hedge fund industry hesitant to trade And given the informal industry—this particular hedge fund
information on an informal basis. “The use of wire tapping is manager makes between 30-40 phone calls a day—it’s too bad
creating real sensitivity in terms of communications between everyone has to be “super-pedantically careful,” he added.
analysts,” Kim Tomsen Budginer, founder of San Francisco-based As far as fundraising goes, since Galleon’s strategy took a
law firm KTB Counsel, said. “Not only are your emails potentially short-term high-frequency trading approach it follows that funds
being tracked but also your phone calls as well [...] frankly, people with a similar strategy are most likely to have difficulties in this
will be more reluctant to trade gossip.” area, said the fund of funds official. Investors will likely be more
While analysts receive information through research reports, wary of short-term trading funds in the next few months. “I’m
suppliers, customers and competitors, the Galleon case has not going to say fundraising will stop, but it’s just another hurdle.
introduced a new level of caution that will hinder And in this environment, no one needs extra hurdles,” he added.
conversations. Opinion is divided on whether this will have Not everyone believes the Galleon case will have a huge effect
implications for performance. on performance, due to the abundance of information that is
“I think it will hurt performance because a lot of corporations readily available. Plus, “the vast majority of long/short equity
will be scared about giving out information,” said a managing funds have never used insider information,” Donald
director at a New York-based fund of funds firm. A lawyer Steinbrugge, founder of third-party marketing firm Agecroft
agreed. “For hedge funds seeking an informational edge, it will Partners, added. “And those that have historically used insider
really impair their ability to seek that edge,” the lawyer said, information will think twice.”

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50% to alternatives such as long/short hedge funds, global macro
funds, and event-driven strategies. It also allocates 20% to
domestic and international equity, 5% to hybrid funds, and
FUND FOCUS another 5% to private equity.
The consultant, who serves as an extension of the school’s in-
house personnel, performs due diligence and advises the school
on manager selection. “We believe in outsourcing, where
Culver Boosts Alternatives appropriate,” Adams noted. He added that the school chooses
The Culver Academies recently added a total of $14 million in managers based on their track record, expertise, tenure and
sovereign debt, managed futures, global resources and long/short turnover of key personnel and the lack of deviation from stated
market neutral holdings to its $200 million endowment. The investment procedure. “We don’t like style drift,” Adams said. He
four new active investments ($2 million for sovereign debt, $2 also said the school avoids leveraged managers and requires
million for managed futures, $4 million for global resources, and adequate liquidity for its investments.
$6 million for long/short market neutral) were funded by The Culver, Ind., preparatory school was created in 1894 as a
reducing cash, said Jeffrey Adams the chair of the school’s boys’ military academy, but has since evolved into a co-
finance and investment committee. educational facility. Besides Adams, the investment committee
Earlier this year, the school reduced its domestic equity includes Jim Brooks, former ceo of Beverage America; Peter
exposure and has continued to maintain a relatively high cash Fasseas, chairman of Metropolitan Bank Group; Paul Gignilliat,
position (20%) in order to have dry powder for future senior v.p. of UBS Financial Services; Jim Henderson, retired
opportunities when markets return to reduced levels of volatility. chairman and ceo of Cummins Inc.; Robie Vaughn, chairman of
To maximize diversity, the school favors the fund of funds Vaughn Petroleum; Miles White, chairman and ceo of Abbott
approach, and none of its 25 active managers hold more than 5% Labs; Larry Wilson, retired chairman and ceo of Rohm and
of the endowment’s total assets, said Adams, who took over the Haas; and John Buxton, head of Culver Schools.
chairmanship earlier this year.
For the fiscal year ending June 30, the fund returned -12.86% Personal
– more than twice the performance of many sophisticated Adams retired as president and director of Wilmington Trust-
endowments, such as Harvard Management Company, which Georgia where he served from 2003 to 2005 and led the bank’s
lost 27.3% in the same period. Through Sept. 30, trailing 12- wealth advisory/federal savings bank office. From 1995-2003, he
month performance at Culver was 0.82%, trailing three-year served as executive v.p. for Balentine & Company, a registered
performance was 1.96%, and trailing five years was 5.16%. The investment advisory firm later acquired by Wilmington Trust.
fund emphasizes downside protection without sacrificing needed From 1976 to 1995, he was an attorney with Alston & Bird in
upside through careful selection and monitoring of a diversified Atlanta. He earned his bachelor’s degree in English and political
slate of active alternative managers, said Adams. science from the University of North Carolina in 1973, and his
law degree from Yale Law School in 1976. He recently co-
History founded investment advisory firm Balentine L.L.C.
Until 2001, the endowment had a traditional asset mix of Along with his duties at Culver, Adams serves as a trustee at
approximately 60% domestic equity and 40% domestic bonds. Young Harris College, and chairs its marketing committee, and
That year, however, the fund hired Managing Director Brian also serves as board chair at the Care and Counseling Center of
Hunter of Strategic Capital Allocation Group in Boston to serve Georgia. Adams lives in Atlanta with his wife, Corinne; they
as its first consultant and soon thereafter began adapting a more have two grown children. In his free time, he enjoys golf, travel,
progressive investment strategy. private investing and reading—especially biographical and
Besides the aforementioned 20% cash slug, the fund allocates historical novels.

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NONPROFITS EYE
(continued from page 1)

FEMM: Why should a nonprofit invest in indexed equity? time the Standard & Poor’s 500 index, for instance, is in the
Hussain: Traditional long-only managers seldom outperform top quartile of long- only managers after fees.
their benchmarks, after fees, over long periods of time.
Studies have demonstrated that for institutional large-cap FEMM: Where does active management provide alpha?
funds, 90-97% of the returns can be attributed to beta. Thus Lyons: Investors need to be reminded that active management
if the manager’s fee was attributed to the alpha component, it is a zero-sum game. In fact, after fees and costs, active
can be shown that large-cap funds consume 7% of the active management is probably a negative-sum game. We believe
assets as expenses and then generate 2% of losses or negative that alpha is available in many different markets and asset
alpha beyond it. The amount of time dedicated towards classes, but investors need to pick managers that have skill in
manager selection and monitoring in efficient markets could these areas and apply that skill as broadly as possible. We
be better spent on value-generating research or towards other often hear about areas in which active management is more
alpha-generating opportunities. successful (small-cap, emerging markets, etc.), but what we’ve
found is that while the level of alpha achieved may be higher
Lyons: Index funds provide nonprofits cost-effective, in those areas, the zero-sum game rules still apply, so investors
transparent and flexible exposure to the underlying markets in need to carefully select active managers regardless of the
which they invest. Importantly, index funds also provide markets in which they are investing.
superior liquidity than many active or private market strategies.
The beta of the portfolio will be the primary driver of returns Hussain: Active management may provide long-term alpha in
regardless of the vehicles used for implementation, so our belief markets which are inefficient, where the manager has local
is that nonprofits would benefit greatly from the features these expertise, or where the index does not do a good job of
passive strategies provide. representing the secular trends of that market (e.g., Brazil).

Burke: Because indexing simply attempts FEMM: What equity strategies make sense to index?
to replicate the performance of an Bishop: That depends on an investor’s
underlying benchmark, there is little risk beliefs. Do they think that the markets are
of manager underperformance. Portfolio inefficient? If yes, go active. If no, then
management costs are minimal and index. If they answered “yes” to the first
security turnover is relatively low, so question, then can active management add
transaction costs are reasonable. In value in the equity market and capitalize on
Patrick Burke addition, an investment committee’s job the inefficiencies? If “yes,” go active, if “no,”
can be made less complex through the use of indexing. It Bailey Bishop then index. Do they feel confident that they
simplifies investment decision-making and can remove any can find the active managers who will beat the market and be
stock or sector biases. The transparency of the index on the positive side in the zero-sum game? If “yes,” go active,
approach helps to minimize any perceived or actual conflicts if “no,” then index.
of interest.
Hussain: Large-cap equities, where the markets are generally
Pippin: More and more nonprofits are extremely efficient and generating alpha on a sustained basis is
focusing on generating alpha in alternative difficult. Even if alpha actually materializes, it can barely move
portfolios such as hedge funds and private the meter in terms of out-performance versus the relevant
equity, where there are more inefficiencies benchmark metric. Indexing is also attractive wherever swap
in the markets and less constraints on pricing is attractive.
skilled managers’ alpha producing ideas and
activities. In addition, Burton Malkiel’s Pippin: It can make sense to index any equity strategy for which
work has shown that over longer periods of Jeff Pippin passive index investment is available. It probably makes sense to


use indexing as a default strategy and bring in active management benchmarks. While the index concept is relatively simple,
in situations where there is high conviction that the manager can quality execution requires skill and experience. You also need
produce alpha on a sustained basis. to understand the firm’s securities lending program, how the
revenue from it is allocated, and whether that allocation
Lyons: For nonprofits, one of the biggest creates any conflicts between the manager and your
issues is how to deal with inflation. Two areas organization.
of passive management we have seen grow
recently are commodities and Treasury Lyons: Manager selection is extremely important with indexed
Inflation Linked Securities since they can investments. An investor should look carefully at the firm’s
potentially commitment to the passive
protect an business and the resources
Carter Lyons
investor “Manager selection is not relevant with the manager deploys within
should we enter a more indexed investments unless you are their indexing team
inflationary environment. (technology, portfolio
Another area where we have obtaining this exposure via exchange managers, traders, risk
seen an uptick in demand is traded funds or mutual funds.” managers, etc.). Price is only
traditionally illiquid markets one component of the overall
such as real estate and private equity. due diligence that should be performed before selecting an
index manager.
FEMM: How important is manager selection with indexed
investments? What should you look for in a manager? Hussain: Manager selection is not relevant
Burke: Selecting the right index manager is just as important with indexed investments unless you are
as choosing the right active manager, but it might be a little obtaining this exposure via exchange traded
easier because some of the key selection criteria are more funds or mutual funds. Fees and expenses
readily apparent. Some of the selection criteria include an plus the tracking error of the chosen vehicle
evaluation of costs, tracking precision, investment approach versus the relevant benchmark are the
Anjum Hussain
(i.e., full replication vs. optimization) and the underlying bigger concerns.

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Search Directory Powered by:
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The following directory includes search and hire activity for the past month. The accuracy of the information, which is derived from
many sources, is deemed reliable but cannot be guaranteed. All amounts are in US$ millions unless otherwise stated. To report manager
hires and new searches, please call Mark Faro at (212) 224-3813, or fax (212) 224-3699.
For further information on iisearches’ daily search leads and searchable database of mandates awarded and lost
since 1995, please visit iisearches.com or contact Keith Arends at (212) 224-3533 or karends@iinews.com
Potential Searches
Total Account
Fund & City Amount Assignment Size Consultant Comments/Firm Hired

Baylor College of Medicine, Houston USD811 U.S. / Real Estate N/A Hewitt Associates, The fund is considering a potential increase to its real
Independence, OH estate portfolio in 2010.
Beloit College, Beloit, WI USD85 Global / Consultant N/A None The endowment is considering hiring a consultant for its endowment
fund. It currently uses State Street Global Advisors. It plans to hire
a firm by the first quarter.
Capital University, Columbus, OH USD49 International / USD4.90 Hirtle, Callaghan & The fund is considering a potential boost to its international equity
Active Equity Company, West allocation. A decision is expected by year’s end and pending approval
Conshohocken, PA could ramp up the asset class by up to 10%.
Claremont McKenna College, USD433 U.S. / Hedge Funds N/A Cambridge Associates, The endowment will increase its allocation to its hedge fund portfolio
Claremont, CA Boston by the first quarter.
Colonial Williamsburg Foundation, USD685 Global / Active Equity N/A Cambridge Associates, The fund is mulling the possibility of seeking a manager for a global
Williamsburg, VA Boston equity brief by mid 2010.
Davidson College, Davidson, NC USD400 U.S. / Active Equity N/A Cambridge Associates, The endowment may consider increasing its domestic
Boston equity allocation by up to 5% during the first quarter.
Davidson College, Davidson, NC USD400 U.S. / Active Fixed N/A Cambridge Associates, The fund may consider increasing its credit allocation by
Income / Credit Boston up to 5% during the first quarter.
Florida College, Temple Terrece, FL USD12 Global / Asset Study USD12 None The endowment will review its asset allocation and manager roster.
Marymount University, Arlington, VA USD17.90 U.S. / Active Fixed Income N/A None The fund is considering the possibility of upping its
fixed income allocation.
Miami University, Oxford, OH USD337 Global / Alternative N/A Graystone Consulting, The endowment is evaluating its private equity, venture capital
Washington, DC and private real estate investments.
Miami-Dade College (Foundation), Miami, FL USD75 U.S. / Alternative N/A Consulting Services The foundation is examining maiden allocations to commodities
Group, Memphis and real estate.
Occidental College, Los Angeles USD308 U.S. / Active Fixed Income USD30.80 Cambridge Associates, The fund is considering plans of investing up to 10% into its fixed
Boston income portfolio.
Occidental College, Los Angeles USD308 U.S. / Cash USD30.80 Cambridge Associates, The fund is considering plans of investing up to 10% into
Boston its cash portfolio.
Oregon State University Foundation, USD340 International / Active Equity N/A Hammond Associates, The fund is considering an increase to its international equity exposure,
Corvallis, OR St. Louis as a possible hedge against a weaker U.S. dollar. A decision is
expected before year’s end and pending approval it may boost
allocations by up to 10%.
Pine Crest Preparatory School, USD37 U.S. / Alternative N/A Morgan Stanley Investment The fund is contemplating the possibility of increasing its alternative
Fort Lauderdale, FL Consulting, New York allocations by 5% to enhance returns.
Pitzer College, Claremont, CA USD84 U.S. / Active Fixed Income N/A Hammond Associates, The endowment may target its fixed income asset class for an
St. Louis increase in the coming year.
Pitzer College, Claremont, CA USD84 U.S. / Alternative N/A Hammond Associates, The endowment may target alternative investments for an increase
St. Louis in the coming year.
Rotary Foundation / The Rotary International , USD582 Global / Asset Study USD582 NEPC, Cambridge, MA The fund plans to conduct an asset allocation study early next year.
Evanston, IL
Rotary Foundation / The Rotary USD582 U.S. / Real Estate / REIT N/A NEPC, Cambridge, MA The fund is monitoring real estate manager RREEF, due to performance
International , Evanston, IL related issues and is scheduled to review the firm in January.
Southern Illinois University Foundation, USD75 U.S. / Active Equity N/A Fund Evaluation The fund may consider hiring a manager for its
Carbondale, IL Group, Cincinnati domestic equity portfolio.
University of Houston, Houston USD450 Emerging Markets / N/A Cambridge Associates, The fund is keeping a keen eye on emerging markets equity and may
Active Equity Menlo Park, CA decide to make commitments in the coming year.
University of Puget Sound, Tacoma, WA USD218 International / Multi Asset N/A Fund Evaluation The endowment is looking to invest in international products.
Group, Cincinnati
University of Rhode Island Foundation, USD74 U.S. / Hedge Funds USD7.40 Cambridge The foundation is contemplating a potential boost to its alternatives
Kingston, RI Associates, Boston portfolio and may target hedge funds for the increase.
University of South Carolina Foundations, USD230 Emerging Markets / USD11.50 Fund Evaluation The foundation is examining a possible first-time allocation to emerging
Columbia, SC Active Equity Group, Cincinnati markets equity. The school plans to rely on the recommendations of its
consultant, Fund Evaluation Group, to whom all manager inquiries
should be directed.
University of Tennessee-Chattanooga USD86 U.S. / Active Fixed Income N/A LCG Associates, Atlanta The fund is mulling the possibility of an increase to its bond portfolio,
Foundation, Chattanooga, TN ` which may be made as early as year’s end.



Potential Searches (cont’d)
Total Account
Fund & City Amount Assignment Size Consultant Comments/Firm Hired
Wisconsin Alumni Research Foundation, USD1,500 U.S. / Active Equity N/A NEPC, Cambridge, MA The fund has plans to seek a long only equity manager next year.
Madison, WI
Wisconsin Alumni Research Foundation, USD1,500 U.S. / Hedge Funds N/A NEPC, Cambridge, MA The fund has plans to seek a hedge fund manager next year.
Madison, WI
Wisconsin Alumni Research Foundation, USD1,500 Emerging Markets / N/A NEPC, Cambridge, MA The fund has plans to seek an emerging markets
Madison, WI Active Equity equity manager next year.

New Searches
Longwood University, Farmville, VA USD30 Global / Consultant USD30 None The fund has issued a request for proposals seeking an investment
consultant. All proposals are due by Jan. 11. A selection
is slated for the second quarter.
University of Puget Sound, Tacoma, WA USD218 U.S. / Alternative / USD21.80 Fund Evaluation Group, The endowment is eyeing a potential boost to its real asset portfolio
Real Assets Cincinnati and may target private energy and commodities for the increase.

Updated Searches
Baylor College of Medicine, Houston USD811 U.S. / Asset Study USD725 Hewitt Associates, The fund may consider an increase to it real estate portfolio next year.
Lincolnshire, IL
Catholic University of America, USD165 U.S. / Active Equity N/A Cambridge Associates, Acadian Asset Management has been removed from the fund’s
Washington, DC Menlo Park, CA watch list, due to improved performance. The firm managed
a large-cap equity account.
Catholic University of America, USD165 International / Active Equity N/A Cambridge Associates, Acadian Asset Management has been removed from the fund’s
Washington, DC Menlo Park, CA watch list, due to improved performance. The firm managed an
international equity account.
Franciscan Missionaries of Our Lady USD800 U.S. / Cash N/A Cambridge Associates, The fund has upped allocations to cash. The increase which will be
Health System, Baton Rouge, LA Menlo Park, CA handled by its custodian JPMorgan.
Harvey Mudd College, Claremont, CA USD174.10 U.S. / Active Fixed Income N/A Cambridge Associates, Barclays Global Investors has been dropped from the fund’s
Boston fixed income portfolio, for unspecified reasons.
Mount St. Mary’s College, Los Angeles USD73.40 Global / Asset Study USD77 Cambridge Associates, The fund has recently completed its asset study and has done some
Menlo Park, CA changes in its manager roster.
Norwich University, Northfield, VT USD150 U.S. / Active Fixed Income USD5 Cambridge Associates, Boston The fund has terminated Brandywine Global Investment Management,
due to unspecified reaons.
Pine Crest Preparatory School, USD37 U.S. / Active Fixed Income USD1.60 Morgan Stanley Investment The foundation has upped its fixed income exposure to 22% from 17%
Fort Lauderdale, FL Consulting, New York as it sought to stabilize its portfolio.
Pitzer College, Claremont, CA USD84 U.S. / Active Equity USD0.75 Hammond Associates, The fund recently dropped a small-cap equity mandate run by
/ Small-Cap St. Louis North Point Portfolio Managers.
St. Lawrence University, Canton, NY USD180 U.S. / Active Fixed Income N/A Cambridge Associates, The fund has terminated Silver Point Capital from its active
/ Absolute Return Arlington, VA fixed income,absolute return portfolio due to performance reasons.
University of Houston, Houston USD450 U.S. / Hedge Funds USD20 Cambridge Associates, Boston The endowment has upped its hedge fund allocations to 12% from
7.1%. The increase did not result in a search for managers as it
was distributed among its incumbents.
Western Pennsylvania School for USD113 U.S. / Asset Study USD113 Wilshire Associates, The fund has recently completed its asset study and has not initiated
Blind Children, Pittsburgh Pittsburgh any essential changes in the portfolio.

Completed Searches
Baylor College of Medicine, Houston USD811 U.S. / Multi Asset N/A Hewitt Associates, Barclays Global Investors
Independence, OH
Beloit College, Beloit, WI USD85 U.S. / Passive Equity USD28 State Street Global State Street Global Advisors
Advisors, Boston
Braille Institute of America, Los Angeles USD80 U.S. / Active Fixed Income USD7 Cambridge Associates, Boston Income Research & Management
Colorado State University Foundation, USD210 U.S. / Active Equity USD5 Monticello Associates, Unknown
Fort Collins, CO Denver
Colorado State University Foundation, USD210 U.S. / Active Equity N/A Monticello Associates, Unknown
Fort Collins, CO Denver
Franciscan Missionaries of Our Lady USD800 U.S. / Active Fixed Income USD5 Cambridge Associates, The Vanguard Group
Health System, Baton Rouge, LA St. Louis
Groton School, Groton, MA USD261 U.S. / Hedge Funds N/A Cambridge Associates, Elliott International
Boston
Ithaca College, Ithaca, NY USD178 Global / Active Fixed Income USD10 Prime, Buchholz & State Street Global Advisors
Associates, Portsmouth, NH


Foundation & Endowment Money Magazine 11-30-2009

Foundation & Endowment Money Magazine 11-30-2009

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