Michigan State University has hired their first chief investment officer

Michigan State is on a roll.

In college football they’re rated number three in the country and still in contention for the national championship.  And, they’re undefeated and rated number one in early-season basketball.

Not bad; but we’ve got even bigger news.

My friend Philip Zecher has just been appointed MSU’s first-ever chief investment officer, reporting directly to Dr. Lou Anna K. Simon, MSU’s president. The trustees announced the appointment on Friday and Phil called me up to give me the official word.

Phil is a low-profile guy with an impressive background, but he’s now moving up into a more prominent position: running $2.3 billion of the school’s $2.7 billion endowment. ($400 million resides in the MSU Foundation and will continue to be run by that board.)

So, this letter may help to introduce him to the foundation and endowment community and to the asset managers who will be doing business with him.

A conversation with Philip Zecher:

Skorina: So, Phil, big congratulations on your appointment.  I suspected something like this might be brewing, but apparently all the stars finally lined up.

Zecher: Thanks, Charles.  As you’ve pointed out, most endowments over $1 billion have a professionally-staffed investment office, even more so when you get above $2 billion.  So, it was pretty likely they were going to pull the trigger on that sooner or later.  I’m really honored that they picked me; but it’s also a big challenge and responsibility.

Skorina: We helped recruit Nebraska’s first head of investments, Brian Neale, and Maryland’s current chief investment officer, Sam Gallo; so that left just MSU and Rutgers in the Big Ten without a CIO, or at least a director of investments.  I believe Rutgers just opened a search for their first investment head, and now your appointment rounds out the whole conference.

But, you’ve actually been working with the endowment for quite a while on a volunteer basis, haven’t you?

Zecher: Yes. I served for four years on a subcommittee that advised the trustees on investment strategy, along with some very good colleagues.  So, I’ve become kind of a known quantity around here.

Skorina: You’re an alumnus and also a professor, aren’t you?

Zecher: Yes and no.  I earned my doctorate from MSU, but I’m not a career professor.  I had an appointment last year as “executive-in-residence” and taught a finance course in the business school.  That is very interesting, getting face-to-face with students and having a chance to talk to them about how investing works in the real world.  I hope they got as much out of it as I did.

Skorina: Your PhD is in nuclear physics and you wrote a bunch of papers in that field, so shouldn’t you be counting quarks or something instead of running an endowment?

Zecher: Well, things change.  I loved science and math and still do.  But when I got my doctorate in 1996 it was the peak for hiring quants on Wall Street.  The models they were using were new, complex, and very challenging.  Compared to being an assistant professor of physics somewhere, it was an exciting place to be.

Skorina: Also, it didn’t pay too badly.

Zecher: [Laughs]. Yes, that too.

Skorina: You specialized in risk analysis and had your own company for a while, didn’t you?

Zecher: Yes.  I co-founded a firm called Investor Analytics, which I sold in 2006.  Then, I joined a hedge-fund manager called EQA Partners as a partner and chief risk officer and worked there until 2012. 

Skorina: So, more excitement than academia; but a lot less tenure.

Zecher: Definitely much less.  Recently I’ve been consulting with other funds and developing textbook materials for risk models and portfolio analytics.  I’ve also gravitated back to campus.  In addition to working with the endowment I’ve sat on the board of the MSU Foundation which is involved in science and technology issues, technology transfer and so forth; where science, academics and finance kind of come together.

Skorina: MSU’s investment performance over ten years has been around the median for over-$1 billion endowments.  That’s pretty decent, but not outstanding.  Do they expect you to do better?

Zecher: Well, that’s always the plan, isn’t it?  But you know better than most, Charles, how hard it is to for an institution to get consistently above-average returns.  It takes time to build a team and a strategy, and there are a lot of people involved besides the CIO.  But if I didn’t think I could contribute something I wouldn’t have taken the job.

Alternatives are increasingly important to institutional investors and I’ve been there.  It’s risk-adjusted returns which really count; and risk-management is something I’ve been studying and applying for twenty years.

Skorina: I think they made a good choice, Phil.  Full disclosure: I spent part of my undergraduate years at MSU and my grandmother taught piano in the music department there for decades.  So I’m glad to see their money being handled by someone as well qualified as you are.

Before we go, I just have one question.  You’re a math guy.  So how come there are fourteen schools in the Big Ten?  How does that work, anyway?  When they kept adding schools shouldn’t they have made it the Even Bigger Fourteen, or something?

Zecher: Charles, there are some mysteries that even science shouldn’t pry into.

Skorina: Thanks again.  And best of luck to you, Phil.