Swensen crosses the Atlantic

In an effort to broaden its portfolio mix, Cambridge University recently formed an advisory board, including Yale investment guru David Swensen and Permira partner Damon Buffini. By Paul Fruchbom.

Though the University of Cambridge, founded in 1209, is significantly older than similarly prestigious institutions across the Atlantic, it is nonetheless, financially speaking, a mere toddler. While Ivy League upstarts such as Harvard and Yale boast endowments in the tens of billions and investment track records that surpass those of almost any other institutional investor, Cambridge’s endowment is a relative pittance, a little more than £1 billion ($1.8 billion; €1.5 billion). And while both Harvard and Yale have been pioneers in alternative asset investing, Cambridge’s portfolio is fairly straightforward: 70 percent is invested in stocks (primarily in the UK), 15 percent in real estate and the balance in bonds and cash.

Perhaps that’s why the British university is hoping for a bit of advice from its US brethren. Earlier this month, Cambridge announced the formation of its first ever Investment Board, designed to advise the Board of the University on managing its endowment. The name that caught everybody’s attention: David Swensen, chief investment officer of Yale University.


Swensen: sharing Ivy League secrets

Swensen, of course, is well known as one of the most influential – and successful – investors in the world. Under his stewardship, the Yale endowment has generated an annualized return of 17.4 percent over the past decade, bringing its total assets to $15.2 billion for the fiscal year ending June 30, 2005. Though it may seem unusual for the head of a college endowment to be advising one of his competitors, the Yale CIO does have ties to Cambridge: Alison Richard, the university’s vice-chancellor, was formerly the provost at Yale.

In addition to Swensen, the newly created board will include Michael Dobson, chief executive of Schroders, Egerton Capital co-founder John Armitage and Permira managing partner Damon Buffini, among others. The board will meet for the first time in March and one of its first tasks will be the hiring of a chief investment officer, a relative rarity among European endowments. While it is unclear what investment strategy the board will recommend, over time it is expected that the university may broaden its portfolio into alternative assets such as private equity, particularly given the professional background of the advisory board members.

Part of the challenge for Cambridge and other UK institutions such as Oxford is that their endowments are not centralised at the university level, but are rather divided among the various colleges. Another issue is that UK alumni are notoriously less generous donors than their US counterparts. Both institutions are making an effort to address both issues. Cambridge, for its part, has recently launched a £1 billion fundraising effort to celebrate the university’s upcoming 800-year anniversary.

Whether or not that fundraising drive and their new board turns Cambridge into a limited partner for the 21st century, however, is yet to be determined.