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September 6, 2006
Another Endowment Manager Bites the Dust
Only in the deranged world of universities would an 8.5% annual rate of return on a $10+billion portfolio have you on the outs with your bosses. It has happened again, however. Bob Boldt, the head of University of Texas Investment Management Company (UTIMCO) resigned, effective last Friday, to return to the private sector.How had Boldt done? Well, in four years Boldt had taken endowment assets from $11.2-billion to $15.5-billion, producing the above-mentioned 8.5% annual return. It was a fairly remarkable feat for the fourth-largest university endowment in the U.S., but it wasn't enough for him to stay in his job. Boldt had been taking noisy shots over (sub-market) compensation, the cost of (sub-market) office renovations, so a return to the private sector couldn't have been a tough decision.
To put all of this in broader context, this now makes at least four major university endowment managers who have left in recent years -- despite posting excellent returns. Some of this is a function of runaway assets in the hedge fund market calling their name, but I wouldn't underestimate the role of university bureaucrats in making exiting an easy decision. Given that there are currently 22 U.S. universities on billion-dollar (and larger) fund-raising campaigns you'd think they show more care in how they manage their endowment managers, but apparently not.
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I don't disagree that UTIMCO's board is better than most of its university endowment ilk, but that hasn't prevented him from being pilloried for comp, renos, etc. I still think universities are self-destructive on this issue, even if some are marginally less self-destructive than others.
Unless you think investment talent is fungible, that is. If you believe that it is replaceable, then you hire the best you can find for the least you can pay him, let him do his job, let the {hedge fund|private equity|whatever} industry bid him away from you, rinse, lather, and repeat.
Even if such talent is not fungible, there is precious little evidence that increasing compensation actually increases the chances of your landing exceptional, non-fungible talent. In that event, repeat the former process, just expect less.
FD: my 2002-2005 returns were 15.4%, stdev
Stupid html tags. That is supposed to finish, stdev less-than-symbol 12%, which I considered disappointing, barring '02.
Actually, UTIMCO's board is one of the more sophisiticated groups around and hardly merits the description "university bureaucrats." http://www.utimco.org/scripts/internet/board_members.asp
I'd suggest that there was a legitimate disagreement about how the fund should be managed. Bob didn't like the direction his bosses wanted to go, so he left. I don't think anyone, on either side, is losing any sleep over this.