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University of Washington Forms Company for $3B Endowment

Image: University of Washington Forms Company for $3B Endowment
University of Washington campus, Seattle. (Denise P. Lett/Dreamstime)

Monday, 14 Sep 2015 11:02 AM

The University of Washington created an investment management company to oversee the state system’s $3 billion endowment as it seeks to boost returns.

The university’s board of regents approved the company at a meeting Thursday, saying it will help attract expertise to the endowment and better access to “best-in-class” money managers. The firm inherits a staff of 19 people led by Keith Ferguson, the university’s chief investment officer hired more than a decade ago from Fidelity Investments.

“There will be a more robust structure within the university for managing our investments,” said Norman Arkans, a spokesman for the state system. “It’s partly to signal that we’re a mature, sophisticated operation and we function like any other investment company.”

Washington joins other public institutions with large endowments such as the University of Texas and the University of Virginia that have organized their investment groups more formally into companies, giving them more independence. They followed private colleges such as Harvard, the world’s richest school, which established a management company in 1974.

Retain Staff

The companies can help insulate university investment teams from campus politics and give them greater discretion over compensation, helping to attract and retain staff, said Mark Yusko, founder of Morgan Creek Capital Management in Chapel Hill, North Carolina.

“It is an evolution,” said Yusko, former chief investment officer at the University of North Carolina, who left the state school in 2004. “Public universities are a little slower because they are more bureaucratic.”

The University of Washington last week said it earned an investment return of 6.8 percent in the year ended June 30. The endowment had an annual return of 7.5 percent in the past 10 years. The median return for endowments and foundations over $500 million this year is 3.6 percent, according to an estimate by Wilshire Trust Universe Comparison Service.

The university is elevating Ferguson as part of the change, which requires him to report directly to the president. Ferguson was the first chief investment officer hired after Washington created the position in 2004. He was paid $623,700 in 2013, according to the state’s Office of Financial Management.

The university will also expand the board overseeing the endowment, seeking to add at least one more person in the next year, according to Arkans. The board currently includes David Bonderman, co-founder of private equity firm TPG Capital, as well as Michael Larson, who invests Bill Gates’s fortune.

The creation of the new company was reviewed by the state’s attorney general as well as the university’s investment consultant, Cambridge Associates, according to documents from the meeting last week. The entity won’t be managing money outside of the university -- whose flagship campus is in Seattle -- and will still be subject to the state’s freedom of information act, according to Arkans.

 

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The University of Washington created an investment management company to oversee the state system's $3 billion endowment as it seeks to boost returns.The university's board of regents approved the company at a meeting Thursday, saying it will help attract expertise to the...
washington, university, investment, company
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2015-02-14
Monday, 14 Sep 2015 11:02 AM
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