Endowment performance and pay at our flagship state schools:

Last year we published our first annual review of endowment performance at the biggest and best public colleges.  See: https://www.charlesskorina.com/nl-46-performance-pay-and-the-rest-of-the-story/

The super-endowments of the traditional Private Ivys — like Harvard and Yale — are always closely watched, including by us.

They manage a lot of money and are trend-setters for the broader investment community.

The public-college endowments garner much less attention.  They’re a bit smaller, and they’re scattered across the country in uncouth fly-over states outside the Northeast Media Corridor.  And their graduates are statistically less likely to land in the White House.  But attention must still be paid.

For one thing, as our survey last year demonstrated, many Public Ivy investors have been kicking the assets of their Private Ivy “betters” for years.  As of fiscal year 2012, the Universities of Virginia, Michigan, Pittsburgh and Texas (and Penn State) all had five-year returns superior to HarvardYale or Stanford.

We don’t think this was generally appreciated until we called attention to it.

Below, we’ll see how the updated pecking order looks as of FY2013.

This year we’re expanding our coverage from 12 to 15 schools.  Our original idea was to use Greene’s list of Public Ivys and look at the dozen with the largest endowments.  The Public Ivys are said to offer an education comparable to that of the traditional Private Ivy schools at a much lower cost.  Whether this is strictly true is debatable, but it’s an effective marketing tool, and the term has stuck.

We’ve mostly followed Greene’s list, but have tweaked it slightly to suit ourselves.  This year we’ve added University of Florida, University of Nebraska, and Michigan State University to our study.  All have endowments over $1.3 billion, which puts them among the largest in the country.

These historic institutions (many are Land Grant colleges dating back to the 1860s) have played a critical role in the cultural and economic development of our country and their respective states.  Now, as those states reduce their financial support, their endowments will have to do more of the fiscal heavy lifting.  How well their investment managers are doing their jobs is more important to more people than ever before.

Ranking by AUM:

Here are our 15 Public Ivys ranked by size as of June, 2013.  They total about $70 billion in aggregate.

Public Ivys – Endowment Assets FY2013:


Rank Endowment AUM ($Bil)
1 U. of Texas System 20.45
3 U. of California System 11.23
2 U. of Michigan 8.38
4 U. of Virginia 5.17
5 Ohio State U. 3.15
6 U. of Pittsburgh 2.98
7 Pennsylvania State U. 2.96
8 U. of Minnesota (U. & Fdn) 2.76
9 U. of North Carolina (U. & Fdn) 2.38
10 U. of Washington 2.35
11 U. of Illinois 1.93
12 Indiana U. and Fdn 1.74
13 Michigan State U. 1.64
14 U. of Florida Fdn 1.36
15 U. of Nebraska Fdn 1.34
N.B.: All amounts per NACUBO/Commonfund Study of Endowments FY2013, except U. of California.  The UC amount is “total endowment assets” for the system per UC Regents annual report FY2013, including separate campus foundations.
One-year performance in FY2013

Now, here’s our Gang of Fifteen, ranked by self-reported 1-year investment return.  They all use the same fiscal year ending June 30, 2013.  The most relevant benchmark is the average returns for endowments over $1 billion reported by the NACUBO-Commonfund NCSE study (which includes about 850 endowments).  For reference we also include returns for the S&P 500, Barclay’s Aggregate Bond index and an old-school 60/40 stock/bond blend.

We also inserted returns for the two biggest Private Ivy endowments: Harvard and Yale.

And here we ritually say that 1-year returns aren’t very important in the life of an immortal institution, even though everyone likes to look at them.

Five-year returns are more important and risk-adjusted 5-years returns are more important still.  We report and discuss both of these further along.

Public Ivys – Endowment Returns FY2013:


Rank Endowment Rtn %
NA S&P 500 20.60
1 U. of Washington 13.50
2 U. of Virginia/UVIMCO 13.40
3 U. of Illinois 13.10
4 U. of California (System) 13.00
5 U. of Nebraska Fdn 12.90
6 Indiana U. 12.50
NA Yale U. 12.50
7 Michigan State U. 12.10
NA 60/40 Stock/Bond blend 12.10
8 U. of North Carolina/UNCMC 12.10
9 U. of Minnesota/UMFIA 11.80
NA NCSE Endowments >$1 bn Avg 11.70
10 Ohio State U. 11.60
11 Pennsylvania State U. 11.30
NA Harvard U 11.30
12 U. of Michigan 10.80
13 U. of Pittsburgh 9.50
14 U. of Texas/UTIMCO 9.30
15 U. of Florida/UFICO 9.01
NA Barclay’s U.S. Agg Bond -0.70
FY2013 ended a long ten months ago, and we’ve all moved on.  But let’s recap what happened between July 2012 and June 2013.

It was a very good year for stocks and a very bad one for bonds, with alternatives somewhere in between.

A traditional stock/bond investor would have earned 12.1 percent with her 60/40 blend.  But the ratio of stocks to bonds in the average endowment is higher; in fact, it’s about 77/23.  So, an endowment getting only index returns would expect to have earned around 15.7 percent on its equity-tilted public-market assets.  Not bad.

Public-market assets comprise less than half (about 44 percent) of the average endowment these days.  The rest of the typical portfolio (alternatives plus cash) returned only about 8.6 percent.

Mash it all together and the average big endowment (over $1 billion AUM) returned about 11.7 percent for FY2013, per the NCSE study.

As we see, our 15 Public Ivys ranged from 9 percent at University of Florida up to13.5 percent at University of Washington.

First, while we congratulate Keith Ferguson and his University of Washington team on their excellent number, it appears to be a bit of a fluke.  As we shall see when we turn to the 5-year returns, UW has averaged closer to the bottom than the top of this group in recent years.

University of Virginia, on the other hand, has been consistently among the best-performing public endowments, and their 2013 ranking is typical, not exceptional.

Unlike Washington, Virginia is significantly underweight in public equities relative to most big endowments.  But, their active managers beat the S&P by 22.8 percent vs. 20.6.  Half their fixed-income portfolio (about 10 percent of AUM) is invested in marketable alternatives and credit, and those managers came through with a 15.7percent return.  Their hedge funds also had a good year.  Overall, UVIMCO seems to be getting outstanding performance from their external managers.  We’ll have more to say about UVIMCO and CIO Lawrence Kochard further below.

In their first year on our Public Ivy roster, both Nebraska and Michigan State earned above-average returns, with Nebraska surpassing both Yale and Harvard.

We should note that neither school had an internal CIO in this period.  Nebraska just recently acquired one (with a little help from us!), leaving MSU the only one in this group still sans a CIO.

Overwhelmingly, endowments over $1 billion AUM employ professionally-staffed internal investment offices.  Each of them at some point in the past independently weighed the costs and benefits and opted to hire a CIO.

Susan Krauss, treasurer at University of Kentucky, recently undertook her own benchmarking survey of 15 peer institutions, looking at their staffing practices and performance.  She concluded that the schools who employed a CIO earned slightly better returns compared to those who didn’t: 50 basis points more per year over ten years.  That’s a small sample, but we suspect the result points in the right direction.

We think that MSU pays their general consultant – Cambridge Associates – over $1 million per annum.  That’s a substantial fee, but it’s not an outsourcing arrangement (for which CA would probably charge much more).  Investment discretion remains with the investment committee, who pilot the process with some help from the treasurer’s office.  They seem to be getting their money’s worth from CA.  They performed well in 2013 and, on a risk-adjusted basis, their 5-year return ranks a very good fourth among this group of fifteen.

Since Michigan State is our semi-alma mater, and is locked in a traditional rivalry with that other Big Ten school in Ann Arbor, we’re obliged to say that MSU has recently humbled University of Michigan athletically.

As all the world now knows, MSU crushed UM in football by 29 to 6 back in November (going on to win the Big Ten title and defeat Stanford in the Rose Bowl).  It got worse.  In March, the Spartans defeated the Wolverines in basketball 69 to 55, securing themselves another Big Ten tournament championship.

Now, we see that MSU has also surpassed the investment performance of their (much richer) rival on our 1-year, 5-year, and 5-year risk-adjusted charts.  And they did it without a distinguished chief investment officer like Erik Lundberg.

All is not lost in Ann Arbor, however.  UM’s women’s softball team was undefeated in the Big Ten with a 12-0 record as we go to press.

No, seriously: congrats to Carol Hutchins, who has coached the UM women to 27 consecutive winning seasons in her 27 years on the job.  Her female Wolverines have now won the Big Ten championship every year for the past five years by preposterously lopsided win-loss margins.  How’s that for consistent excellence?

Our other Public Ivy rookie – University of Florida – brings up the rear for 1-year returns.

University of Florida Investment Company’s Douglas Wynkoop resigned back in October, leaving the endowment without a CIO for most of the fiscal year.  But his departure was likely more a result than a cause of Florida’s not-good performance.

That 9.1 percent for FY2013 was a big miss against their internal benchmark of13.6 percent.  On a 3-year basis they returned 8.6 percent, 330 basis points behind their 11.9 percent benchmark.

Their quarterly report was pretty candid about their problems.  The weak returns were “driven by several factors, including the poor relative performance from several managers in the hedge strategies portfolio in the past year, the mismatch between the private equity and natural resources portfolio and its benchmark … and poor relative performance from the real estate portfolio.”

Six months after Mr. Wynkoop’s departure, the UF Foundation has only recently announced hiring of a recruiter and formal commencement of a CIO search.  We don’t know what the delay has been, but it’s unlikely that they’ll have a successor in place before fall.  UFICO board chairman Andrew Banks and his colleagues are minding the store, but that’s a long time to leave that office vacant when investment performance is clearly under par.  The new guy is going to face some challenges and it will be interesting to see who they come up with.

In last year’s report we explained at tedious length how the various parts of the University of California’s decentralized endowment management system worked, and we’re not going to go there again.

See our “What’s wrong with Cal? Part I” section toward the bottom of our 2013 Public Ivies report:


Still, we want to do a quick deconstruction of that 13 percent number in our chart, since the UC system actually employs three independent CIOs, not just one.

About $7.1 billion is managed by the Regents CIO in Oakland, as part of the general endowment pool.  The two biggest campus foundations, UCLA and Berkeley manage $1.5 and $1.3 billion, respectively.  Given the prestige of the schools and the size of the endowments, these two could be considered Public Ivys in their own right.  Moreover, Berkeley and UCLA have hired their own CIOs.  A further $2.0 billion is managed by all the other, smaller, campus foundations.

Neither Berkeley nor UCLA have enough track record as fully-staffed investment offices to tell us much about their long-term performance, but here we break down the 1-year, 3-year and 5-year returns:

University of California System – Returns by campus:
Investment manager FY2013 AUM $Bil FY2013      1-yr Rtn % 3-yr Rtn % 5-yr Rtn %
UC Regents GEP 7.133 11.6 10.3 4.1
UC Berkeley Fdn/BEMCO 1.278 12.8 9.9 3.4
UCLA Fdn/UCLAIC 1.535 15.2 9.8 3.1
Other campus Fdns 2.011 15.9 8.3 2.0
UC System Total/Avg 11.957 13.0 9.8 3.5
We see that the Regents pool has done better over the longer, bumpier 5-year span, but Berkeley and UCLA with their new investment offices did almost as well over three years.  We think the outperformance by the campus foundations in FY2013 is a one-off; they had much higher equity allocations than the Regents GEP in a very good year for stocks.

The CIO at Berkeley Endowment Management Company is John-Austin Saviano, a former consultant with Cambridge Associates, who earned $542 thousand in 2011, including a $270 thousand bonus.

UCLA Investment Company recruited the redoubtable Srinivas “Srini” Pulavarti from University of Richmond’s Spider Management Company in 2012, and we think he makes in the neighborhood of $900K, including bonuses.

The half-decade rankings:

Now, here are the annualized 5-year returns, which give us a better sense of relative performance over the longer run.

Public Ivys – Endowment Returns FY2013

Rank by Annualized 5-yr Return:


Rank Endowment 5-yr Rtn %
1 U. of Virginia/UVIMCO 6.20
NA 60/40 Blend 6.20
2 Pennsylvania State U. 5.20
3 U. of Minnesota/UMFIA 4.10
4 U. of Pittsburgh 4.00
5 U. of Illinois 3.90
6 U. of Nebraska Fdn 3.80
NA NCSE >$1 Bil 3.80
7 Indiana U. 3.70
8 U. of California (System) 3.50
9 U. of Texas/UTIMCO 3.40
10 Michigan State U. 3.30
NA Yale U. 3.30
11 U. of Michigan 3.30
12 U. of Florida/UFICO 3.00
13 Ohio State U. 2.90
14 U. of North Carolina/UNCMC 2.60
15 U. of Washington 2.30
NA Harvard U. 1.70
As compared to the Private Ivys, every one of our Public Ivys beat Harvard over 5 years, and most of them equaled or surpassed Yale.  But, none of them quite matched Columbia University’s 6.8 percent return.

University of Virginia tops this chart, as it did last year.  And Penn State earns a very honorable second place.

Note that University of Washington, which led the pack for 1-year return in FY2013, ranks much lower over five years.  But, Mr. Ferguson’s crew still beat Harvard, so there’s that.

Massive losses in the 2008/2009 fiscal year still cast a long, dismal shadow over this period.  Next year, all endowments will see a gratifying jump in those 5-year numbers as 2009 dwindles in the rear-view mirror.  For now, these numbers are still far short of the 7 to 9 percent returns most endowments cite as their long-term objective.

Also note that Texas, with its less volatile portfolio, is now nearer the middle, rising from 14th to 9th-ranked as compared to the 1-year chart.  Their 3.4 percent return puts them ahead of Yale, Stanford, and Harvard, which are their nearest peers in AUM.  That’s a pretty comfortable spot for Mr. Zimmerman and Team UTIMCO.

Speaking of volatility, let’s now look at risk-adjusted returns.  There are various ways to measure them, and all have their advocates, but we will stick with Sharpe Ratio, which is the most commonly used.  It represents units of “excess” return per unit of risk, and higher numbers are better than lower ones.

Public Ivys – Endowment Returns FY2009-2013

5-yr Return Rank by Sharpe Ratio:


Rank Endowment SR
1 U of Texas/UTIMCO 0.421
2 U of Virginia/UVIMCO 0.343
3 Pennsylvania State U 0.311
4 Michigan State U 0.240
5 U of Pittsburgh 0.233
6 U of California (System) 0.233
NA NCSE >$1 Bil 0.229
7 U of Illinois 0.213
8 U of Minnesota/UMFIA 0.211
9 U of Nebraska Fdn 0.208
10 Indiana U 0.200
11 U of Michigan 0.182
12 Ohio State U 0.161
13 U of Florida/UFICO 0.150
14 U of Washington 0.122
15 U of North Carolina/UNCMC 0.035
And now we see what that low-volatility strategy has done for Texas.  They’re the decisive winners.  This is a deliberate policy choice, as UTIMCO says in their 2013 report:

“Over the past few years, the Endowment’s investment returns have lagged other large endowments primarily due to the Endowment’s lower risk profile…While it is the case that risk has been rewarded over the past few years, there is agreement [among staff, Board, and Regents] that the necessity to protect principal supersedes the desire for higher investment returns.”

CIO Bruce Zimmerman recently told a reporter how they manage risk in terms of allocations:

“…We have one of the lowest private equity exposures (27% of total assets vs. averages in the 35%-45% range and as high as 50%-60% in some endowments) and the highest hedge fund exposure (30% of assets).  Private equity is viewed as the “riskiest” investment and hedge funds are viewed as the “least risky” investment.  Therefore it is not surprising that UT’s returns have been a bit lower than the other endowments.

“We have been increasing our portfolio’s risk profile – very prudently and gradually – over the past six years and plan to continue to do so.

“When equity markets are strong, as they have been since the financial crisis in 2008, our portfolio will lag riskier peers, but in tougher times our returns should look attractive on a relative basis.”

Virginia, we see, manages to stand high in both rankings over five years: absolute return and risk-adjusted return.  That implies that they’re achieving above-average returns with below-average risk, which is quite an accomplishment.

UVIMCO beats their peers using this one weird trick (shocking)!

Just kidding.  That’s a complete lie.

We tried valiantly to identify Dr. Kochard’s one secret weapon when we spoke to him recently.  But, of course, it’s more complicated than that.

What he told me had more to do with institution-building and not fixing what isn’t broken.

Back in 1999 when UVIMCO was set up, Alice Handy had already been managing the endowment for 20 years.  She served as CEO/CIO in the new structure until Christopher Brightman took over in 2004, and she went on to found Investure.

Lawrence Kochard was recruited from Georgetown University to succeed Mr. Brightman in late 2010.

Dr. Kochard was good enough to talk to me recently:

Skorina: Larry, UVIMCO leads our Public Ivys for the second year in a row.  Your team not only gets very good returns, it gets them very consistently.  Do you have any secret you’d like to share with us?

Kochard: Charles, when Chris Brightman took over in 2004, he didn’t blow anything up.  He inherited a very good board, some very good external managers and a well-trained staff.  He maintained the standards set by Alice and I’ve tried to do the same since I took the job.

Skorina: I notice that you’ve had a fair amount of staff turnover in the past couple of years.  The interesting thing is how many of them are UVA graduates.  Out of 13 investment staffers, at least 11 of them have UVA degrees.  We’ve noted the same thing at Notre Dame.  They have an exceptional investment office, too, and it’s full of Notre Dame grads.  Is that important to you?

Kochard: We have high standards for who we hire and what we expect of them.  If we can find someone great who also has ties to the school, all the better.  And, after all, we turn out a pretty good product here.  My MA and PhD are from Virginia, and I even taught here for a while.  So, I guess I’m another example of a legacy hire.  We’ve had some turnover, but there’s also a lot of continuity.  Our senior managing director, Rob Freer, has been here for thirty years.  He’s a big piece of our institutional memory.  And, of course, his undergraduate degree is from UVA.

Skorina: Larry, looking at your reports, the best explanation I can come up with for your consistently good returns is that you just get really good results from your external managers across the board.  How do you do that?

Kochard: It’s a pretty well-known fact that most money managers fail to beat their passive benchmarks.  We have a disciplined process for selecting managers who have an edge in both security selection and asset allocation.  We, and my predecessors, have built long-term relationships with some outstanding managers.  They appreciate our patient money and, in many cases, they aren’t accepting any new capital.

Also, Charles, although we’ve had some good annual numbers recently, I should emphasize that we’re long-term investors first and foremost.  We’re perfectly willing to underperform passive benchmarks and our peer investors in the short term as long as we reach our goals over the longer term.

CIO compensation: Who’s making what:

The salaries paid to a CIO and his senior staff amount to a very small expense relative to the size of the funds they manage: typically on the order of one-tenth of one percent per annum, or 10 basis points, as we financial sophisticates say.  Much, much more is usually paid to the external managers (the black-hatted firms that newspapers refer to as “Wall Street”), a fact that is harder to see and draws less fire.

These numbers are of intense interest to management recruiters like us for obvious reasons, but are also fascinating to many others.  So, here they are, as best we can figure them out.

The salaries in each case are for the latest calendar year available, which may be 2011, 2012 or 2013; and are gleaned from various sources we deem reliable.

Public Ivys

Chief Investment Officer Compensation:


Endowment CIO

(as of FY2013)

CIO Comp W2 Base & Other ($000) CIO Comp W2 Bonus & other ($000) CIO Comp  W2 Total ($000)
1.   U. of Texas Zimmerman, B. $577.1 $1,388.6 $1,965.7
2.   U. of Michigan Lundberg, E. (1) $600.0 $980.2 $1,580.2
3.   U. of Virginia Kochard, L. $497.3 $850.0 $1,347.3
4.   U. of California Berggren, M. (2) $470.0 $817.3 $1,287.3
5.   Ohio State U. Hook, J. (3) $627.3 $483.2 $1,110.5
6.   U. of N. Carolina King, J. $559.8 $215.9 $775.7
7.   U. of Washington Ferguson, K. $473.0 NA $473.0
8.   U. of Minnesota Gorence, D. $345.0 $101.6 $446.6
9.   U. of Pittsburgh Marsh, A. $425.0 NA $425.0
10.  Indiana U. & Fdn Stratten, G. $221.6 $52.3 $273.9
11. U. of Florida Fdn Wynkoop, D. $249.3 $8.3 $257.6
12. Penn State U. Branigan, D. (4) $250.0 NA $250.0
13. U. of Illinois Ellison, E. (5) $200.0 NA $200.0
14. U. Nebraska Fdn (None) (6.) NA NA NA
15. Michigan State U. (None) (7.) NA NA NA
NB 1.

1. Eric Lundberg’s salary for calendar year 2013

2. Marie Berggren resigned as Regents CIO 02Jul2013.  Melvin Stanton and Randy Wedding were acting U Cal Regents co-CIOs through remainder of FY2013.

3. Jonathan Hook bonus of $483,243.44 is for 2014, 2013 was undisclosed, 2012 was $407,745.

4. David Branigan salary estimated by CAS.

5. Ellen Ellison appointed CIO Jan 2013.  Salary estimated by CAS.

6 & 7. U Nebraska Fdn and Michigan State U had no CIO position in FY2009-2013.

NB 2.: CIO tenure

Zimmerman, B. 2007-Current
Kochard, L. 2011-Current
Berggren, M. 1 2006-2013
King, J. 2005-Current
Hook, J. 2 2008-2014
Lundberg, E. 3 1999-Current
Ferguson, K. 2004-Current
Gorence, D. 1999-Current
Marsh, A. 1999-Current
Stratten, G. 2002-Current
Wynkoop, D. 2011-2013
Branigan, D.4 1997-Current
Ellison, E.5 2013-Current
(None)6 NA5
(None)7 NA5
We suspect that Ohio State paid their CIO a substantial bonus in 2013, but the bonus was not publicly disclosed and we chose not to estimate an amount.  What you see are just the known base salaries.  We’ll publish an update if and when we get better data.

The comps for Penn State and University of Illinois are not exact, but we believe our estimates are in the ballpark.

Readers can draw their own conclusions about these numbers, but the only opinion that counts is that of the trustees who hire the CIOs and sign off on their contracts.

We will observe that David Branigan, long-time executive director of the Penn State investment office has presided over very good returns over the past five years (both absolute and risk-adjusted), while pulling down a relatively modest salary.  Technically, the chief investment officer there is Mr. Branigan’s subordinate, John Pomeroy, with thirteen years on the job; so he and his staff deserve a shout-out as well.

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