The Skorina Report: The Best, The Rest & Our Pick for Public Endowment CIO of Decade

Skorina 1 Fundfire (2)This month we are pleased to bring you our annual survey of endowment performance at the Public Ivys, including many of America’s biggest, most prestigious, and best-endowed public universities.

We think the performance of these endowments ought to be of interest not only to the endowment and foundation community, but to the investment world at large.  They include some extremely talented people getting results which rival investment organizations anywhere.

And, they are important clients for many for-profit money managers all over the world.  Since most of them are located far from Wall Street and the Northeast media corridor they tend to be overlooked, and we’re glad to shine a little light on them.

Our list also happens to include two of the college basketball powers who recently contended in the NCAA Final Four.  As we now know, both

Michigan State (our semi-alma mater!) and Wisconsin succumbed to Duke two weeks ago.

We’d like to say that they at least surpassed the Blue Devils in investment performance, but we must hew to the cold, hard facts.  Still, the University of Minnesota’s Office of Investment and Banking did slightly exceed mighty Duke’s 1-year return for 2014, as we’ll see below, so it’s not a complete shutout for the Big Ten.

We recruit chief investment officers and financial executives for both nonprofit and for-profit organizations.  As such, we used to think that 5-year annualized return was an appropriate metric to map the performance of an institution to a specific chief investment officer.

But, after working with the data for a while, it became clear that the average tenure of CIOs at big endowments was closer to ten years.  The high turnover at state and municipal pensions (where the pay is low and other opportunities beckon) drags down the overall average.

The CIO slot at a major university, on the other hand, is more likely to be the capstone job for a mature professional.  Occasionally one is recruited away, or leaves under fire; but many are happy to finish their careers there.

Also, we bow to the fact that it’s long-term performance which counts for any institutional investor; and ten years is about the shortest span which could reasonably be considered “long term.”

The format in this report is similar to our Private Ivys survey back in November, where we first expanded to 10-year data, so 10-year public and private endowment performance can be readily compared.


In addition to “absolute” investment return we have calculated 10-year risk and risk-adjusted return as measured by standard deviation and Sharpe Ratio.

Institutions are only well-served when good returns are obtained without unreasonable risk.  “Reasonable risk,” of course is a variable, not a constant, and different institutions have different views on what it means.

We’ve ranked our Public Ivys by these various measurements.  We’ve also compiled an always-popular chart showing the latest available compensation figures for the CIOs and many of their senior staffers.

Our astute readers can interpret all this data without any further help from us.  But what fun would that be?  There is an irresistible journalistic imperative to pick some winners and…non-winners, and generally offer our opinions about what it all means, so we shall.

Among the winners, we’ll see, is Erik Lundberg at the University of Michigan, who recently celebrated his 15th anniversary as Michigan’s first and only CIO.  Mr. Lundberg was kind enough to talk to us about the challenges of maintaining superior returns over the long haul, and we present an interview with him further below.

Now, on to the data:

Absolute returns:

The decade just ended had something for everyone.

First: three years of “normal.”  Then: a housing bubble, a stock crash, a global financial crisis, and a Great Recession.  Then: central bankers gave us weirdly ultra-low interest rates and a lustily rebounding stock market.

Meanwhile, back in the “real” economy we saw global unemployment rise to, and hang at, levels not seen in decades; and a GDP which could barely get out of bed.

Finally: a slow, tentative and uneven global expansion while we wait for the bull market to fade and for Ms. Yellen to (ever so gently) re-introduce positive interest rates.

We did miss a few Old Testament tribulations along the way.  And, despite the predictions of many fearful prophets, we’ve so far avoided both 1970s-style inflation and 1930s-style deflation, so there’s that.

Here’s how our Public Ivy investors coped with the decade:

Public Endowments Ranked by 10yr Annualized Returns 2005 – 2014 

Endowment 10yr Returns (%)  2005 – 2014 10yr Std Dev (%) 10yr Sharpe Ratio AUM $bn 30 Jun 2014 
Yale Private Equity 15.4 NA NA NA
Cambridge PE Index 13.7 NA NA NA
Yale Endowment 11.0 15.30 0.66 23.90
1 U of Virginia/UVIMCO 10.8 13.21 0.72 6.95
2 U of Michigan 10.0 14.34 0.62 9.70
3 U of No. Carolina/ UNCMC 9.2 12.08 0.69 2.64
Harvard U/HMC 8.9 15.50 0.59 36.40
4 Michigan State U 8.4 12.02 0.59 2.15
5 U of Pittsburgh 8.3 12.99 0.54 3.49
6 Pennsylvania State U 8.3 12.79 0.54 3.54
NCSE>$1 bil 8.2 12.73 0.59 NA
7 U of Washington 8.0 13.60 0.50 2.83
S&P 500 7.9 17.51 0.36 NA
8 U of Texas/ UTIMCO 7.9 9.84 0.66 25.70
60/40 Stock/Bond 7.9 10.50 0.60 NA
9 Purdue U 7.7 13.23 0.47 2.44
10 U Minnesota OIB & Fdn 7.5 NA NA 3.27
11 U of California System 7.4 11.77 0.49 13.14
12 U Wisconsin Fdn 7.4 NA NA 2.33
13 Indiana U 7.3 14.39 0.41 1.94
14 U of Nebraska Fdn 7.1 13.10 0.43 1.60
NCSE Mean 7.1 NA NA NA
15 U of Illinois Fdn 6.8 12.98 0.41 1.46
Bridgewater AWF 6.7 13.85 0.35 75.00
Barclay’s Agg Bond 5.9 4.88 0.77 NA
16 Ohio State U 5.4 13.22 0.30 3.40
HFR HF Fund of Funds 3.4 NA NA NA


Skorina’s Razor: The 7.2 percent hurdle:

There are two valid perspectives on endowment investment performance.

Forced rankings like ours tell us how endowments have done relative to their peers and, despite occasional protestations, people do care about that.  Everyone would rather see their institution stand higher rather than lower on such lists.

But endowment returns also have to meet a strictly objective, non-relative test.  Over the long run they must be high enough to maintain inflation-adjusted value after providing budgeted annual support for the institution.

From the point of view of the investment office, the target return is imposed upon them by outside forces, and there’s very little wiggle-room.

The formula is: S + I = R. Spending rate + expected inflation = required investment return (net of external fees).

For big endowments, the historical average spending rate has been right around 4.7 percent for years.

The expected inflation rate is a little hazier.  Today, the official Fed long-range target is 2 percent.  The historical CPI has been around 2.5 percent in recent decades, which seems like a prudent expected value.  Stanford seems to prefer the GDP deflator number.  On the other hand, the custom inflation index used by many colleges – the HEPI – is higher than the CPI.

Opinions vary, but we don’t think any prudent investor should officially expect less than 2.5 percent inflation.

A case can be made for adding about 50 basis points to cover the internal costs of running the investment office, too; but we’ll ignore that and other considerations for simplicity.

Take 4.7, add a (lowball) 2.5, and we have 7.2 percent for a generic big endowment.

In our view, that’s an objectively-derived lower bound for what endowments should aim at in our current environment.  But how did things look way back in 2005?

Remarkably, the numbers were exactly the same.  Trailing 10-year CPI inflation back then was 2.5 percent, and the average spending rate for big endowments was 4.7 percent.

So, we think the prospective 10-year hurdle rate for a “typical” big endowment in 2005 should have been about 7.2 percent.

We humbly call it Skorina’s Razor.  (Our Razor is a tiny homage to the great Medieval philosopher William of Occam, who believed in not overthinking things and promoted an early version of the Keep It Simple principle.)

More – much more – was obviously welcome.  Most endowments who disclosed a target rate set it at 7.5 percent or higher.  And most got more.  The average trailing 10-year return for big endowments in 2014 was 8.2 percent per the NACUBO-Commonfund Survey of Endowments (NCSE).

But, outside Lake Wobegone, that necessarily implies that about half of them fell short of the mean.  Some missed by a significant margin, and some even missed the Razor return.

Our guesstimate is that at least ten of the big endowments must have fallen short of 7.2 percent over ten years (if the distribution is approximately normal).  Of the 29 we’ve surveyed in either our Private Ivys or Public Ivys reports, just three missed the Razor for trailing 10-year returns in 2014.  All three were among our Public Ivys, as we shall see below.

Over this past decade we think 10-year return of 7.2 percent was barely acceptable; 8 percent was good; 9 percent was excellent; and 10 percent or more was world-class.  If you can beat the Razor, then you can further rejoice if you also beat some of your peer investors.

The median 10-year return for our 16 Public Ivys was 7.8 percent.  Thirteen out of sixteen exceeded a 7.2 percent minimum hurdle rate (but three did not!).  Four earned between 8 and 9 percent; and just three exceeded 9 percent.

Of those last three, two earned a world-class 10 percent or more: University of Virginia and University of Michigan.

Lawrence Kochard’s University of Virginia (UVIMCO) put up the best 10-year number: 10.8 percent.  This isn’t surprising, since they also led the league on a 5-year basis in last year’s report.

And no one should be surprised to see big, sophisticated endowments like Erik Lundberg’s University of Michigan or Jonathon King’s University of North Carolina (UNCMC) in the second and third spots with 10 and 9.2 percent, respectively.

It is slightly surprising, though, to see Michigan State University in fourth place with a very respectable 8.4 percent.  And, be it noted, they did it without a CIO or full-fledged investment office, relying mostly on a volunteer investment committee and their outside consultant, Cambridge Associates.  However they’ve done it, the results speak for themselves and the board should be pleased.

The giant University of California system (using a weighted average of all their campus foundations and including the central UC Regents pool) earned 7.4 percent; so they beat the Razor, but not by much. (Below, we have a breakout of the three separately-managed major pools and their CIOs within the UC system, to see where the earnings came from.

University of Nebraska Foundation (which also had no CIO in this period) fell just a hair short of the Razor at 7.1 percent.  University of Illinois Foundation and Ohio State University, however, both earned significantly less than our hurdle rate, with 6.8 and 5.4 percent, respectively.

Given the resources available to a major school with an endowment over $1.5 billion, institutional leaders at those schools need to ask themselves why their investments aren’t doing better.  OSU’s performance should be especially troubling to their board, given the size of the endowment — $3.4 billion — and the fact that they had a very reputable CIO — Jonathan Hook — for the past five years.

Mr. Hook, now departed, inherited a bad situation in 2010.  The endowment had been run by the university Treasurer, who made some embarrassing mistakes and was essentially fired.

Things improved somewhat under Mr. Hook in the 2010-2014 period, when OSU ranked 13th out of 15 Public Ivys, beating North Carolina and University of Washington (not to mention Harvard!).

Still, OSU’s 1-year return for 2014 was at the bottom of our Public Ivy rankings (see 1-year returns below).  We know that he was trying to build up a private-equity portfolio from scratch and had to absorb low early returns from the notorious PE J-curve.  He has also publicly complained that the administration didn’t give him the kind of support he feels he was promised.

All three of the underperformers now have new or almost-new CIOs: Brian Neale at Nebraska, and John C. Lane at Ohio State both arrived in 2014; and Ellen Ellison took over Illinois in early 2013.  They all have excellent resumes, and they all have their work cut out for them.

A Breakdown of University of California Returns:

The UC system actually has three CIOs: one at the central Regents office in Oakland, plus one each at the separate campus foundations at Berkeley and UCLA.

Marie Berggren had been CIO of the Regents for seven years when she resigned in mid-2013, and John-Austin Saviano, CIO at UC Berkeley Foundation (BEMCO) has been on the job for five years.  So, both can be assigned a good measure of responsibility for performance of their pools.  Srini Pulavarti at the UCLA Foundation (UCLA Mgt Co) was CIO for less than a year when the 2014 fiscal began, so he hasn’t had much time yet to turn the ship.

As we see here, the Regents and BEMCO had similar returns over ten years and they were slightly higher than the system-wide average.  Both were OK but not exceptional compared to their Public Ivy peers.  BEMCO’s 5-year number was slightly below the Regents: 11.5 vs. 12.0.

The other, mostly much smaller, campus foundations had mediocre results, even though some of them outsource a significant piece of their AUM back to the Regents’ pool, treating it as an external manager.

U of California System  Investment Pool CIO AUM AUM % 10yr rtn
UC Regents GEP Berggren 7.23 56.2 7.7
UC Berkeley/BEMCO Saviano 1.73 13.4 7.6
UCLA/UCLA Mgmt Co Pulavarti 1.49 11.6 6.9
Other UC Foundations 2.42 18.8 6.8
Total/Weighted Avg 12.87 100.0 7.4


A shallow dive into allocations:

A deep dive into Public Ivy asset allocations and their relative performance is beyond the scope of this survey, but we can make a few obvious observations about where returns came from in this decade.

One is that good stock-market returns can’t account for all the performance of the leaders.  The S&P 500 earned 7.9 percent in the period.  About half our league beat that number.

And, they weren’t powered by hedge funds in general, which returned only 3.4 percent according to one widely-used benchmark.  That doesn’t mean that some of the leaders didn’t have above-average hedge-fund portfolios; some of them certainly did.

For example, University of Virginia (UVIMCO) reports that their “marketable alternatives and credit” portfolio (which excludes plain-vanilla long-short equity funds) earned 7.4 percent over ten years, far higher than the Cambridge Associates Fund of Hedge Funds benchmark.

We also know that endowments with high-quality, long-running private equity portfolios did very well with them.  The Cambridge Associates PE Index earned 13.7 over the decade.

UVIMCO reports that PE gave them 13.8 percent over 10 years, and Yale reported a lofty 15.4 percent in the same period.  University of California Regents, which manages more than half of  the system’s assets, reported 10-year returns of 13.9 and 17.5 on PE and VC respectively (as of Dec 31, 2013).

Even Harvard which reported an embarrassing near-zero return to PE over the latest five years, probably managed 7 or 8 percent over the decade, riding on earlier good performance (they haven’t released an exact number).

Bond allocations have shrunk to about 8 percent at big endowments and earned only about 5.9 percent.  They didn’t help absolute return in this period, but their low volatility boosted risk-adjusted return.

Overall, it’s clear that the top performers were fueled to a large extent by very good returns to their private capital allocations, including private equity, venture capital and private real estate.  Put another way, the Swensenian Yale model of portfolio construction did quite well.

Swensen vs. Dalio: A brief digression on investment strategy:

Just for fun we inserted 10-year returns for Ray Dalio’s Bridgewater All Weather Fund.  (And thanks to Mark Melin at the Valuewalk website for digging out their hard-to-find year-by-year returns).

Mr. Dalio is an admired investor who purveys both retail and institutional products, and Bridgewater is the world’s largest hedge fund manager.

AWF is one of the pioneers in so-called risk-parity strategy (Mr. Dalio’s even giant-er Pure Alpha Fund is a more traditional macro hedge fund making complicated directional bets).

Risk-parity is radically different from the Yale/Swensen model toward which most big endowments lean.  Most of our readers have probably sat through a presentation on risk-parity, so we won’t dilate on it here.

The theory is a bit complex, but the marketing is simple: here is a strategy that will offer stable returns in all conditions: inflation, deflation, boom, bust, and all kinds of asset rotations.  Also, it’s a mostly-passive strategy which should be achievable with relatively low fees.  It doesn’t depend on paying a lot of money to private equity funds to find great deals in inefficiently-priced nonpublic markets.

Several major pensions have large risk-parity commitments but, as far as we know, none of the big endowments do. (Some major endowments do business with Mr. Dalio, however, including UTIMCO, although apparently not subscribing to the risk-parity strategy).

Something like the AWF, if it worked as advertised, would obviously be appealing to investors after an episode like the 2008/2009 smashup.  Endowments took their lumps then and many observers thought the Swensen model was disproven.  Maybe risk-parity was a superior strategy.

But, if we’re doing our math right, it appears that the AWF had significantly lower 10-year returns than any of our Private or Public Ivys, with very similar volatility.  The result, as we see below, is a much lower Sharpe Ratio.

Inception date for the AWF was 1996, so it’s 19 years old as of 2014.

According to CNBC, the annualized return for AWF 1996-2014 has been 8.95 percent.  But if returns in the most recent 10 years were just 6.7, that means returns in 1996-2004 must have been much higher, around 11.2 percent.  So performance seems to have declined in recent years.

One of our best Public Ivys, University of Virginia, publishes a (not quite comparable) 20-year return.  It’s 12.6 percent annualized for 1995-2014, much better than AWF’s 8.95 percent for 1996-2014.

If we look at the Swensenian mother church, the Yale Investment Office, we see an even better annualized return: 13.8 percent for 1996-2014.  And, the 10-year volatility for the both endowments was similar to AWF, not significantly higher as some might have expected.

If all-weatherliness is your goal, then it’s not obvious that AWF did any better than the best endowment investors through the storms of the last two decades.  These numbers suggest that it did somewhat worse.  And, as Dr. Swensen himself has suggested, the Yale model may be a long way from dead.

We could add that Mr. Dalio’s annual income, of which the revenues from AWF are a significant part, make endowment CIO salaries (which we chronicle below) look like pocket change.

2014: The year that was:

One-year returns are relatively unimportant in the life of an immortal institution, but it’s still instructive to see how different portfolios behaved in a specific period relative to standard benchmarks and to each other.

Public Endowments Ranked by FY2014 One-year Returns


Endowment FY 2014 1 yr Return (%) 10 yr Returns (%)2005 – 2014 AUM $bn30 June 2014 
S&P 500 24.6 7.90 NA
Yale U 20.2 11.00 23.89
1 U of Virginia/UVIMCO 19.0 10.80 6.95
2 U of Pittsburgh 19.0 8.30 3.49
3 U of Michigan 18.8 10.00 9.70
4 Indiana U 18.4 7.30 2.15
5 Pennsylvania State U 17.9 8.30 3.49
6 U of Nebraska Fdn 17.7 7.10 3.54
70/30 Stock/Bond 17.6 NA NA
7 Purdue U 17.1 7.70 2.44
8 Michigan State U 17.1 8.40 2.15
9 U of Minnesota/OIB & Fdn 16.9 7.50 3.20
10 U of Wisconsin Fdn 16.8 7.40 2.33
NCSE > $1bn 16.5 8.80 NA
60/40 Stock/Bond 16.1 7.7 NA
11 U of Washington 15.8 8 2.83
12 U of No. Carolina/UNCMC 15.7 9.2 2.64
13 U of California System 15.5 7.4 13.14
Harvard U/HMC 15.4 8.9 36.40
14 U of Illinois Fdn 15.1 6.80 1.46
15 U of Texas/UTIMCO 14.9 7.9 25.70
16 Ohio State U 14.4 5.40 3.40
Bridgewater AWF 8.6 6.7 75
HFR HF Fund of Funds 7.6 3.4 NA
Barclay’s Agg Bond 4.9 5.9 NA

The best and worst performers are the same as on the 10-year chart: Virginia and Ohio State, respectively.  In a year when equities continued to boom our whole league posted returns far above their long-term targets.

And, among the bigger Public Ivys, we see that California, North Carolina, and Texas all somewhat underperformed their big-endowment peers for the year.

A note on University of Minnesota: This school has two separate endowment pools run by two different CIOs: Stuart Mason at the university’s Office of Investments and Banking, and Douglas Gorence at the separate University foundation.

The returns in our charts are a dollar-weighted average of the two funds.  If we broke out Mr. Mason’s return, however, it would have been an excellent 20.4 percent for 2014.  That beats Virginia, Yale, and every other endowment we know of for the year (except little Grinnell College, which matched it with 20.4 percent).  Over ten years Mr. Mason’s return was a good-enough but unexceptional 7.3 percent.  Mr. Gorence’s returns for 1 and 10 years were a bit better: 14.6 and 7.6, respectively.

And now, a look at endowment performance ranked by risk:

Public Endowments Ranked by 10 yr Standard Deviation

Endowment 10yr Std Dev (%) 10yr Returns (%) 2005 -2014 10yr Sharpe Ratio AUM $bn 30 Jun 2014 
Barclay’s Agg Bond 4.89 5.87 0.77 NA
1 U of Texas/UTIMCO 9.84 7.88 0.66 25.70
60/40 Stock/Bond 10.50 7.70 0.60 NA
2 U of Wisconsin Fdn 11.45 7.40 0.58 2.33
3 U of California System 11.77 7.40 0.49 13.14
4 Michigan State U 12.02 8.43 0.59 2.15
5 U No. Carolina/ UNCMC 12.08 9.18 0.69 2.64
NCSE>$1 bil 12.73 8.76 0.59 NA
6 Pennsylvania State U 12.79 8.29 0.54 3.54
7 U of Illinois Fdn 12.98 6.80 0.41 1.46
8 U of Pittsburgh 12.99 8.32 0.54 3.49
9 U of Nebraska Fdn 13.10 7.10 0.43 1.60
10 U of Virginia/UVIMCO 13.21 10.78 0.72 6.95
11 Ohio State U 13.22 5.41 0.30 3.40
12 Purdue U 13.23 7.66 0.47 2.44
13 U of Washington 13.60 8.00 0.50 2.83
Bridgewater AWF 13.90 6.71 0.35 75.00
14 U of Michigan 14.34 10.01 0.62 9.70
15 Indiana U 14.39 7.26 0.41 1.94
Yale 15.30 11.00 0.66 23.90
Harvard/HMC 15.50 8.90 0.59 36.40
S&P 500 17.51 7.88 0.36 NA

The most conspicuous number on this chart is the rock-bottom 10-year volatility for University of Texas (UTIMCO): just 9.8 percent.  That’s way below the 12.7 percent for the average big endowment, and way below the 13 percent-plus for other high performers like Virginia and Michigan in the same period.

This is the outcome of deliberate policy down in Austin.

In 2013, CIO Bruce Zimmerman wrote:

“Over the last few years, the Endowments’ investment returns have lagged other large endowments primarily due to the Endowments’ lower risk profile… risk-adjusted returns are in the middle of the pack [and] UTIMCO and the Board of Regents have all concurred with having a less-risky portfolio.”

We interpret that to mean that UTIMCO’s low volatility is just about where they want it.

As we’ll see in the next chart, UTIMCO’s lower-risk portfolio has helped it achieve very good risk-adjusted returns.

What can we can we say about an endowment like Virginia, which takes a bit more risk, with a 10-year standard deviation of 13.2?  Is this deliberate policy?

UVIMCO indicates indirectly what their overall risk-tolerance is.  They say it’s reflected in his long-term policy portfolio, which is admirably simple: 60 percent equity/10 percent real assets/30 percent fixed income.  Conceptually, it’s a first cousin to the classic 60/40 allocation, even though it bears only a vague resemblance to the more complex assets in the portfolio.  Occam would approve of its simplicity.

They state that as of 2014, their long-term pool’s market risk is consistent with that policy portfolio.  And, as we see below, UVIMCO’s higher volatility is more than offset by their high absolute returns, giving them a very good Sharpe Ratio.

We think Texas and Virginia (and our other top-tier performers), although they diverge on risk-tolerance, are each just about where they want to be in risk-return space.  That doesn’t necessarily apply to some of the lower-performing endowments, whose strategies haven’t worked out quite as well.

Risk-adjusted Return:

Public Endowments Ranked by 10yr Sharpe Ratio

(i.e., units of return per units of volatility)

Endowment 10yr Sharpe Ratio 10yr Std Dev (%) 10yr Returns (%)  2005 – 2014 AUM $bn 30 Jun 2014 
Barclay’s Agg Bond 0.77 4.88 5.87 NA
1 U of Virginia/UVIMCO 0.72 13.21 10.78 6.95
2 U of No. Carolina/ UNCMC 0.69 12.08 0.69 2.64
3 U of Texas/ UTIMCO 0.66 9.84 0.69 25.70
Yale U 0.66 15.30 11.00 23.90
4 U of Michigan 0.62 14.34 10.01 9.70
60/40 Stock/Bond 0.60 10.50 7.70 NA
NCSE>$1bn 0.59 12.73 8.76 NA
Harvard/HMC 0.59 15.50 8.90 36.40
5 Michigan State U 0.59 12.02 8.43 2.15
6 U of Wisconsin Fdn 0.58 11.45 7.40 2.33
7 U of Pittsburgh 0.54 12.99 8.32 3.49
8 Pennsylvania State U 0.54 12.79 8.32 3.54
9 U of Washington 0.50 13.60 8.00 2.83
10 U of California System 0.49 11.85 7.40 13.14
11 Purdue U 0.47 13.23 7.66 2.44
12 U of Nebraska Fdn 0.43 13.10 7.10 1.60
13 U of Illinois Fdn 0.41 12.98 6.80 1.46
14 Indiana U 0.41 14.39 7.26 1.94
S&P 500 0.36 17.51 7.88 NA
Bridgewater AWF 0.35 13.90 6.70 75.00
15 Ohio State U 0.30 13.22 5.41 3.40


Once an endowment has cleared that 7.2 long-term hurdle rate, other criteria come into tighter focus, including risk and liquidity.  Of course, these dimensions of investing can’t really be managed serially; they all flow together.  But liquidity and low volatility availeth not if you can’t hit your long-term hurdle rate.

We think the palm for endowment-investing excellence should go to those who clear the hurdle rate by a comfortable margin while also getting superior risk-adjusted returns.

With both criteria in mind, a clear top-tier of four excellent Public Ivy endowments emerges from these 10-year numbers.  They are: University of Virginia (UVIMCO), University of Michigan, University of North Carolina (UNCMC), and University of Texas (UTIMCO), in that order.

All four endowments easily clear the hurdle-rate, with 10-year returns between 7.9 and 10.8.  But, in addition, each has a superior risk-adjusted return, with Sharpe Ratios north of 0.59 as we calculate them.

They have different risk-vs-return recipes, but they all get the job done.  As Tolstoy never said: Every happy endowment is happy in its own way.

Then there’s a second tier of eight good-but-not-quite-great investors among the Public Ivys.  Those would be: Michigan State University, University of Wisconsin, University of Pittsburgh, Pennsylvania State University, University of Washington, Purdue University, University of California System, and Indiana University, roughly in that order.

All of the second tier meet or exceed the hurdle-rate, with returns from 7.4 to 8.4, but their risk-adjusted returns are just average for big endowments, in the range of 0.41 to 0.59.  Their absolute returns are acceptable, but not exceptional relative to the risk they’re taking.

Alas, there must be a bottom tier.  They are: University of Nebraska Foundation, University of Illinois Foundation, and Ohio State University.  All three tripped on the 10-year hurdle-rate, with returns between 5.4 and 7.1.  But they also had higher-than-average standard deviations.  So, their risk-adjusted returns were also lackluster when compared to their peers, with Sharpe Ratios between 0.30 and 0.41.

(NB: University of Minnesota & Foundation is omitted from the standard-deviation and Sharpe Ratio charts due to insufficient data)

With these data before us, is it possible to pick one individual CIO as arguably the best Public Ivy investor in this period?

In our last report, on a 5-year basis, Dr. Kochard at Virginia was the clear front-runner in all respects, as we said at the time, even though he’d only been on the job for three years.  But now, considering the whole decade, he’s a less defensible choice for overall best.  The 10-year numbers for Virginia build on the outstanding work of his predecessors Alice Handy, and Christopher Brightman in the period 2005-2010.

Among the three longer-serving top-tier CIOs at Michigan, North Carolina and Texas, we think it’s a very close call between Mr. King at North Carolina and Mr. Lundberg at Michigan.  North Carolina has a slightly higher Sharpe Ratio, but Michigan has a higher absolute return.  We are going to rule that 80 basis points of return and an extra six months of seniority in the decade just outweigh the small difference in Sharpe Ratio.

We think Erik Lundberg is the best Public Ivy investor of the last decade.

A conversation with Erik Lundberg:

Leiv Erik Lundberg was born and raised in Stavanger, Norway, an ancient coastal town from which the Vikings once scourged Europe and beyond.

It was his good luck to grow up in the late 1960s when oil was discovered in the North Sea.  The inflow of wealth made it possible for the city’s young people to study business abroad then return to good jobs in the oil industry.  Mr. Lundberg went to school abroad, but never came back.

He landed in the U.S. at age 20, studied business at the University of Wisconsin, then earned his MBA at Ohio State in 1986.

He started in corporate finance at Wisconsin Bell and Ameritech, rising to become an investment strategist at Ameritech’s pension department in Chicago.  In 1999 he got an offer from University of Michigan to become their first-ever CIO at the age of 39.

On his watch the Michigan endowment has almost quadrupled, from $2.5 billion to $9.7 billion, and moved up in the national rankings from 4th- to 3rd-largest public endowment.

His critical task in 1999 was to assemble a team from scratch, and he chose to do it without hiring away senior staff from other organizations.  Instead he brought in junior and mid-level analysts and patiently taught and developed them.


Erik, not many endowment CIOs make it beyond the 15-year mark, and those who do, like David Swensen at Yale and Scott Malpass at Notre Dame, are some of the best in the business.

But here you are going strong in your 16th year on the job and still generating consistently good returns.  What keeps you going?


Charles, it may sound trite, but I love my job.  From the day I started the school has given me all the time and resources I needed to hire and train staff and all the tools I need to get my job done.  I couldn’t ask for a better employer.


I’m interested in staff development.  It seems to me that a superior CIO must be a superior leader and manager, getting his work done primarily through other people.  How do you get the best from your team?


Some of it is obvious.  In the first place, you hire very carefully.  We have a bias toward Michigan grads, who already have an attachment to the school, but that’s not much of a limitation.  Our business and finance graduates are among the best in the world.  We prefer to get people with a few years of experience as junior or mid-level analysts, and then give them a great deal of further training.

We also don’t encourage over-specialization.  We rotate people through all parts of the portfolio to give them deep knowledge of how all the asset classes work.  A modern endowment portfolio is a complicated machine and it’s vital that everybody understand how all the parts fit together.


The other three top-tier Public Ivy endowments we’ve identified are all set up as separate management companies, with their own boards of experienced investors.  Michigan isn’t set up that way. Is that a problem?


No, it isn’t.  We have an advisory committee, apart from the Board of Regents.  They’re alumni and they include some very expert investment professionals.  We work closely with them and benefit from their advice and contacts.


The big Ivys like to boast about all of their Wall Street alumni and their access to good deals.  Is it harder for you to source the best opportunities when you’re working from Ann Arbor instead of Cambridge or New Haven?


No, but you have to work at it.  We keep very careful track of where our graduates end up.  They’re all over the world and we network with them to help us access the best opportunities.

Also, the size we’ve attained, and the prestige of our brand make us a desirable investment partner almost anywhere.  We invested with top venture capitalists like Kleiner, Perkins, for instance, soon after I arrived here, and we’ve done very well with them.  I think our results speak for themselves.


Erik, the Vikings wandered everywhere, but since you were 20 you seem to have gotten stuck in the Big Ten, from Madison to Columbus, and now Ann Arbor.  You must get offers to go elsewhere; do any of them interest you?


I am very happy here, Charles.  Investing is a tough business.  Just when you think you have finally figured it out, things change.  But it’s also endlessly fascinating and throws up a new challenge every day.  And there is a sense of mission in supporting a great institution that will be around for a very long time.  I wouldn’t want to do anything else.

The CIOs and senior staff:

Here are our Public Ivy CIOs ranked by total compensation for the most recent calendar year available.  The data is from sources we deem reliable.  In two cases — Penn State and Illinois — we’ve made our own estimates, which are not exact but we believe are in the ballpark.

Public Ivy CIOs Ranked by Compensation

Endowment CIO W2   Base W2 Bonus W2 Total Cal Yr
1 U Michigan Lundberg, E. $600,000 $980,000 $1,580,000 2011
2 U Texas /UTIMCO Zimmerman, B $595,854 $595,720 $1,191,574 2012
3 Ohio State U Hook, J.  $627,300 $483,200 $1,111,500 2014
4 U California/UC Regents Berggren, M. $272,208 $662,785 $934,993 2013
5 U Virginia /UVIMCO Kochard, L.  $497,062 $368,468 $865,530 2012
6 U No. Carolina /UNCMC King, J. $575,258 $195,542 $770,800 2012
7 U Minnesota /UMFIA Gorence, D. $488,920 $240,000 $728,920 2012
8 U Washington Ferguson, K. $623,700 NA $623,700 2013
9 UC Berkeley Fdn/BEMCO Saviano, J. $310,000 $170,734 $480,734 2012
10 U Pittsburgh Marsh, A. $447,500 NA $447,500 2014
11 Indiana U & Fdn Stratten, G. $280,285 $78,208 $358,493 2012
12 U Minnesota Mason, S. $310,775 NA $310,775 2013
13 Penn State U Branigan, D.  $250,000 NA $250,000 2014
14 U Wisconsin Fdn Van Cleave, J. $221,700 $ 0 $221,700 2012
15 U Illinois Ellison, E. $200,000 NA $200,000 2014
16 Purdue U Seidle, S. $180,760 NA $180,760 2012
17 U Nebraska Fdn (None) 
18 Michigan State U (None)

Marie Berggren resigned as CIO of University of California Regents in mid-2013.  Melvin Stanton and Randy Wedding were acting co-CIOs until Jagdeep Bachher took office in April 2014.  Mr. Bachher’s comp is expected to be about $1.2 million depending on the amount of his bonus.

Two of our Public Ivys — Michigan State and University of Nebraska — had no CIO in 2005-2014.

Nebraska hired their first CIO last year (with some help from Charles A. Skorina & Co.)

Six of these CIOs were on the job for the entire 10-year span 2005-2014.

The exceptions were:

Jonathon King 9 years
Marie Berggren 7 years
Bruce Zimmerman 7 years
Jonathan Hook 5 years
John-Austin Saviano 5 years
Lawrence Kochard 3 years
Ellen Ellison 1 year


As we noted at the top of our report, the average tenure of these executives is closer to ten years than to five years.  In fact, it’s about 8.3 years.  So, more often than not, we think 10-year returns are a fair way to gauge the CIO’s performance.

Readers can make their own judgements about the appropriateness of these salaries.  With one or two exceptions, we think these leaders clearly earned their pay, which is often less than people with comparable credentials and talent make on Wall Street.  That’s certainly the case for Mr. Lundberg, our duly anointed CIO of the Decade.

And, we think several of those toward the bottom of the ranking are clearly underpaid, and someone should probably do something about that.

Now, here’s the credit roll for the supporting casts. 

Meaning no disrespect to the indispensable analysts, accountants and operations people, we have confined this list to people with specifically senior investment-management roles.

They typically have titles like managing director, director, or senior portfolio manager and report directly to the CIO.

We suspect that the staffers at Michigan (and possibly Washington) receive performance bonuses that are not publicly disclosed, so their total comp may be understated.  A look at the table shows that this is standard industry practice and we doubt that a major endowment can attract and keep the best possible talent without such an accommodation.

NB: University of California Regents seems to have an unexpectedly large and well-paid senior investment staff for a $7 billion endowment, but that’s partly an optical illusion.  The Regents CIO also manages a very large pension fund: $68 billion including both DB and DC parts.  So their big staff is spread over a total AUM twice the size of Harvard’s.

Most of these staffers have total comp in the range of $200K – $500K with a few notable exceptions.

Two of them are Elizabeth Snyder at UVIMCO and Cathy Iberg at UTIMCO.  Both of these ladies made more than their bosses in 2012, with Ms. Iberg making an ample $2.1 million.  Ms. Iberg, the President and Deputy CIO, has been with UTIMCO since its inception and retired last year.  We wish her a happy retirement after a long and successful career.

Senior Investment Staff Compensation By Institution


W2 Base & Other W2 Bonus W2 Total Latest Year
U Virginia /UVIMCO $ $ $
Snyder, Elizabeth Mgn Dir    255,694  1,264,189   1,519,883 2012
Freer, Rob Mgn Dir    256,883     614,060      870,943 2012
Alimard, Kristina Mgn Dir    296,463     300,000      596,463 2012
King, Sherri Mgn Dir    176,016     250,000      426,016 2012
Russell, David Mgn Dir    194,989       –        194,989 2012
U No. Carolina /UNCMC $ $ $
Tunick, Kevin  VP Private    358,488     106,477      464,965 2012
Perry, Maurice VP Public    249,585        67,330      316,915 2012
U Texas /UTIMCO $ $ $
Iberg, Cathy A. Dep CIO    214,932  1,929,769   2,144,701 2012
Eakman, Lindel Mgn Dir    250,819     168,391      419,210 2012
Warner, Mark J. Mgn Dir    230,907     108,896      339,803 2012
Shoberg, Mark Mgn Dir    197,918        67,276      265,194 2012
Childers, Debra Manager    144,995     166,966      311,961 2012
Bigham, Scott Director    139,414     114,735      254,149 2012
Ruebsahm, Rodney Sr Dir    189,422        54,911      244,333 2012
Kampfe, James R. Sr PM    199,887        54,911      254,798 2012
Powers, Courtney Director    140,112     119,720      259,832 2012
U Michigan /Inv Office
(See note below)
$ $ $
Everard, Michele J. Inv Mgr    370,000  NA       370,000 2014/15
Thowsen, Joan M. Inv Mgr    370,000  NA      370,001 2014/15
Castilla, Rafael Risk & MD    217,000  NA       217,000 2014/15
Haessler, Michael R. Inv Mgr    197,000  NA      197,000 2014/15
David-Visser, Felicia D. Inv Mgr    175,000  NA       175,000 2014/15
Demeter, David Duncan Inv Mgr    131,000  NA      131,000 2014/15
U Minnesota Fdn /UMFIA  $ $ $
Wood, Wendy W.  Sr Inv Mgr    223,658     110,250      333,908 2012
Behrens, Andrews J. PM Strategist    146,210        77,500      223,710 2012
Arlandson, Daniel J. Inv Mgr    152,003        55,125      207,128 2012
Klevan, Rebecca Inv Mgr    120,266        44,700      164,966 2012
U Washington /Treasury Office $ $ $
Reistad, Garth deputy CIO    451,750  NA       451,750 2013
McAuliffe, David Sr inv off   355,425  NA      355,425 2013
Smith, Sam Sr inv ofr    334,176  NA       334,176 2013
Jiang, Yindeng Quant analyst    180,499  NA      180,499 2013
UC Berkeley Fdn /BEMCO $ $ $
Saviano, John-Austin President    310,000     170,734      480,734 2012
Piuma, Joshua Assoc Dir    178,333        33,423      211,756 2012
Werner, Nicholas Inv Dir    225,000        98,071      323,071 2012
Patel, Sonal Assoc    146,513        50,000      196,513 2012
U California Regents /Inv Office $ $ $
Wedding, Randolph Sr MD Equity    374,500     423,517      798,017 2013
Recker, Timothy MD PE    273,512     241,749      515,261 2013
Choi, Lynda MD Ab Return    274,040     240,641      514,681 2013
Swamy, Satish Sr PM – Fix Inc    257,241     190,683      447,924 2013
Gil, Gloria MD Alts    283,490     162,334      445,824 2013
Fong, Edmond MD Alts    216,126     173,939      390,065 2013
Sterman, Steven Sr PM Fix Inc    272,990        91,484      364,474 2013
Zhang, Sharon Dir – Fix Inc    216,128     138,514      354,642 2013
Winterson, Julia Dir – PE    206,862     146,286      353,148 2013
Liu, Aileen Inv Ofr PE    187,992     122,156      310,148 2013
Cucullu, Michele Dir – PE    156,574     139,882       296,456 2013
Ong, Byron Inv Ofr Fix Inc    182,694        91,353      274,047 2013
Teng, Paul Dir – Equity    182,712        51,925      234,637 2013
Dumas, William Inv Ofr – PE    182,694        26,623      209,317 2013
Winiarz, Chris Inv Ofr Equity    160,000        33,151      193,151 2013
Sison, Cay Inv Ofr R Estate    158,636        23,886      182,522 2013
Huie, Craig Inv Ofr – Alts    131,200        34,085      165,285 2013
Indiana U $ $ $
Stratten, Gary CIO    280,285        78,208      358,493 2012
Weldy, Abe Dir – Alts    196,749        33,903      230,652 2012
Bergstrom, James Dir    127,732        33,903      161,635 2012
Ohio State U $ $ $
Polk, Jerry Dir Illiquid Strat    230,004     156,911      386,915 2014
Gehlman, Bernie Dir Illiquid Strat    190,008     129,625      319,633 2014
Adams, Scott Dir Liquid Strat    190,008     118,225      308,233 2014
U Wisconsin Fdn $ $ $
Olson, Thomas CIO Private Investment 366,665 90,000 456,665 2012
Dobson, John MD Investments 275,108 106,605 381,713 2012
Daniel, Julie Sr Dir Investments 268,648 40,000 308,648 2012
Lopez, Jean-Francis Sr Dir Investments 168,491 0 168,491 2012


Charles A. Skorina & Co is retained by the boards of institutional investors and asset managers to recruit chief investment officers, portfolio managers, and financial professionals.

Charles Skorina earned an MBA at the University of Chicago and began his professional career at Chemical Bank (now JPMorgan Chase), completing the management training program then working as a credit and risk analyst in New York and Chicago.  After a stint with Ernst & Young in Washington, D.C., he founded his own search firm headquartered in San Francisco, focused on the global financial services industry.

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One Comment

  1. Brad Case, Ph.D., CFA, CAIA
    May 4, 2015 at 4:49 pm

    I find these data very interesting–and thanks for compiling them–but I believe they’re extremely misleading. Please correct me if I’m wrong.

    The first problem is that I think some of your numbers are total returns while others are internal rates of return. As numerous others have pointed out, TR and IRR are not comparable measures of performance–and, in particular, IRR is a terribly misleading measure of performance in most circumstances. Ludovico Phalippou does a good job of explicating the problems in an article ( that specifically shows that perfectly average performance can result in misleadingly strong IRR numbers that look a lot like the ones reported by Yale University (and other endowments that follow “the Yale approach”).

    The second problem–requiring only a minor clarification, I hope!–is that you haven’t identified whether the returns you’re reporting are gross or net. The only valid performance comparison is on the basis of net total returns, yet many institutional investors–particularly those active in private equity, hedge funds, private real estate, and other high-fee investment strategies–prefer to report gross returns.

    The third problem is that you’ve reported volatility figures based on manager-provided estimates of asset values, and you’ve compared them with actual volatilities for listed assets. You must know that asset values that are estimated–whether by managers or by “external” appraisers–are systematically smoothed relative to the actual values of those assets, and therefore that volatilities computed from those numbers are essentially useless for the purpose of measuring actual risks. And, therefore, your Sharpe ratios are wrong.

    The fourth problem is that you haven’t measured the illiquidity risk associated with significant exposure to non-listed assets. Even if asset volatility were correctly measured, you can’t treat volatility as a meaningful measure of risk when the asset can’t be converted into cash.

    The fifth problem is that you haven’t adjusted returns for differences in leverage, or given any information about the relative use of leverage–and comparing returns across investments that used differing amounts of leverage is inherently misleading. Two managers invest in exactly the same asset, but one adds leverage and the other does not: therefore, the levered manager shows higher returns. Is that superior performance? No.

    My concerns may be misplaced, and if so then I hope you’ll set me straight. Thanks!

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