Headlines

Treasury Changes
Hiring and Restructuring

by Chris Malins

Over the last ten years, the value of the University’s endowment and the diversification in the types of investments in the portfolio have increased dramatically. In just the last three years, the University has added real estate and hedge funds to the mix. The value of the endowment has increased through a combination of generous donations and market return from $750 million in 1999 to over $1.2 billion today. With a larger pool of assets to manage, the UW has had to reinvent itself to operate more like a larger endowment, with more focused governance and more specialized staff.

First the “governance” part. Prior to 2002, all UW investment decisions were made directly by the Board of Regents, based on recommendations from the Investments Office. In 2002, UWINCO was formed as a voluntary advisory committee to the Board. UWINCO stands for University of Washington Investment Committee and comprises seven investment professionals, with each one bringing a special expertise to the committee. For instance, there is one person who is in charge of a large buyout firm, and he brings UW expertise in that area. Another person runs a local investment house that specializes in bonds and she is available to offer her expertise to UW in fixed income. This committee brings a wealth of real world knowledge and an unbiased perspective to UW asset allocations. UW Treasury staff meet with this committee quarterly to share ideas and seek input on future opportunities.

As most of FM is already aware, on January 1st, UW hired its very first Chief Investments Officer to oversee the endowment. Keith Ferguson has hit the ground running and is currently moving the investments office to its next level of development, a more specialized staff. Prior to Keith’s arrival, due both to the smaller size of the endowment and the shortage of staff, the Investments Office was staffed by “generalists.” A generalist is someone who has a broad knowledge of the entire portfolio, but doesn’t have the time to develop an expertise in a particular area. With a staff of generalists, Treasury Office has relied heavily on the work of consultants when reviewing investment opportunities or when performing due diligence on existing money managers. The new model is one tending towards more specialization, with a staff of Portfolio Managers and Financial Analysts, with each person or team being responsible for a specific strategy in the portfolio. UW will also begin initiating its own investment research, work that has until now been the almost exclusive domain of outside consultants. This movement towards more specialized expertise is a “best practice” of large ($1B and above) endowments and one that UW is seeking to emulate.

To further the goals described above, the investments area has begun to hire financial analysts and structure the staff around investment strategies. One new junior analyst has been hired and two more senior analysts are currently being recruited. These new staff members will work with current Portfolio Managers to be better stewards of the ever growing endowment at the UW.