How cool is your school?

An analysis of "Public Ivy" schools endowment fund returns reveals who really gets top grades.

Having a qualified CIO on hand, with a real track record, can be a major sales tool for the development officers.  After all, if the average Silicon Valley mogul thinks he can invest the money better himself, then why would he not do so, and then gift it out of his estate thirty or forty years from now?  Obviously, the schools would rather have the money today, and the income it generates.

It’s too early to see how these new CIOs are working out.  BEMCO only really has been up and running for two years, and UCLAIC has just launched.  But UC’s own reports make it possible to see what investment returns are campus by campus in recent years.

The UCLA Foundation earned only 0.3% over five years on its self-managed portfolio.  If we count the UCLA-earmarked funds managed by the Regents, we could say that the UCLA endowment earned 1.1% overall.  The money they’re plowing into their new investment office is certainly intended to get something more impressive than a 0.3% return over the next five years.

Berkeley, the other big campus, did only slightly better, with a 5-year return of 0.8% on the $1.1 billion they run through BEMCO.  Averaged together with Berkeley-earmarked money in the Regents pool, they’ve made about 1.3% on their endowment overall.  Again, the BEMCO board, looking forward, would like to see better numbers in the years ahead.

In theory, UC is one big happy family, and no one should care whether a donor writes a check to the UC Regents or to a separate campus foundation.  In practice, every campus would prefer to have the closest possible relationship to its benefactors and their money.

David Blinder, Berkeley’s top development exec, told a reporter last year:

“It is our belief that the donors…feel a higher level of confidence knowing that it is the campus controlling the investment.  Right now, in our conversations with donors, we recommend in the strongest way that endowment gifts and checks and stocks go to the Berkeley Foundation.  It gives us that direct link.”

Blinder was formerly the top fund-raiser at tony Wellesley College in Massachusetts, where he ran a record-breaking development campaign.

In 2011, after four years on the job at Berkeley, Blinder was handed an out-of-schedule $40 thousand salary boost, from $240 K to $280 K, because he was being aggressively courted by other employers, including Berkeley’s sister UC campus at Irvine.  Although he was also a VP of the Foundation, he was paid as an Associate Vice Chancellor of the University, constrained by the campus pay-scales.

They noted that: “As UC Berkeley comes to rely more on private support, professional development leaders like Mr. Blinder are critical to the campus ability to maximize their philanthropy.”  In plain terms, he’s very good at pulling in the money which the state no longer provides.

Unfortunately, their retention efforts fell short.  Dr. Blinder was just stolen away by the Scripps Institute, where he started as their senior VP for External Affairs on March 1.  We suspect he got a very handsome offer well over the $280 K that Berkeley could afford.

But Blinder left behind his giant database.  There are a million names in it, and if you’re Berkeley grad, they will find you.

Our focus on the UC situation is not intended to demean anyone over there.  I know several of the UC Regents managers, who labor just across the Bay from me, and I can attest that they’re very good at their jobs.  Our question is whether the institutional framework can make optimal use of their talent.

But, UC’s size makes it conspicuous, and we think their situation is, to a considerable extent, similar to other public universities across the country.  They’re competing with other potent interest groups, including the public unions and K-12 schools, for slow-growing, debt-strapped state budgets.  We think they are inevitably going to have to rely more heavily on private financial support.  Spinning off SAIMCOs, as Virginia and Texas did years ago, and UC is doing now, may help.

However they go about it, our big public colleges are going to have to get more serious than ever about building and maintaining top-flight, professionally staffed investment organizations. 

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About the Author
Charles Skorina

Charles A. Skorina & Co is retained by the boards of institutional investors and asset managers to recruit chief investment officers, portfolio managers, and financial professionals.Charles Skorina earned an MBA at the University of Chicago and began his professional career at Chemical Bank (now JPMorgan Chase), completing the management training program then working as a credit and risk analyst in New York and Chicago.  After a stint with Ernst & Young in Washington, D.C., he founded his own search firm headquartered in San Francisco, focused on the global financial services industry.

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