ACU was recognized in “The New York Times” for outstanding endowment performance. The National Association of College and University Business collected the data of this years’ endowment performance amongst colleges and the results have brought ACU into the spotlight.
According to “The New York Times“, ACU’s endowment fund had a return of 9 percent over a five-year period. Spalding University saw a return of 8 percent over that same time period, but Yale only stood at a 3.1 percent return for the year ending June 30, 2012.
“For the year ending June 30, 2013 smaller endowments have had better results than the average large endowment. We have had some very good results over the years,” Jack Rich, ACU’s chief investment officer, said. “We have been very blessed but a lot of that is cyclical; what works this year may not work next year. So I don’t read too much into how the smaller endowments have done better than the larger endowments over some time periods.”
ACU’s endowments are comparably smaller than schools like Yale and Harvard.
“Our endowment is actually a good-sized endowment,” said Rich. “We have about $337 million in the endowment today. It looks to me like that would put us in the top 200 of schools, and there are thousands of schools, so that’s a good sign. But when you compare us to some of the large endowments like Yale, Harvard and University of Texas, they have billions and billions of dollars. So we are very small in that context.”
ACU has come a long way since Rich first started working at ACU 22 years ago.
“When I started, the ACU endowment fund was about $50 million. Today it is $337 million,” said Rich. “It’s very different in terms of how we invest, almost a night-and-day difference. And part of it is size; we’ve gotten bigger and we can be more complex in our investments.”
What The New York Times calls the “Yale Model,” has a similar philosophy to ACU.
“The Yale Model is the idea of having a very diversified portfolio, by making use of alternative investments,” said Rich. “So alternative investments would be things like private equity, hedge funds, things that the typical investor doesn’t take advantage of. So, in that sense, we have a high allocation to alternative investments much like Yale and many larger endowments.”
According to Rich, private equity means investing in smaller companies that are traded privately. ACU also allocates funds to what are called “hedge funds,” which are equally non-traditional investments just like private equity. Allocating funds to both private equity and hedge funds helps ACU to reap benefits of diversification.
“The hope is by diversifying your asset allocation, you can reduce your risk and get a similar return to what you can get on the public marketplace. So that’s what we are trying to accomplish,” said Rich.
ACU also has an advantage being located in West Texas. The university has received gifts related to land and energy.
Rich said, “So with our $337 million we would put roughly 40 percent in what I would call private equity or direct investments, and then in hedge funds we have about 25 percent and the rest would be in mostly public markets.”
Rich said they consult with LCG Associates who help them organize investment planning, find managers and give advice. ACU has worked with LCG for over 20 years, which is a long time in this business.
There are important elements to maintaining a healthy endowment fund. One of these elements, according to Rich, is a good investment policy and a good board that watches and helps develop the investment policy. Such elements ensure a reasonable amount of risk and a structure that helps avoid making bad decisions.
“Secondarily,” Rich said, “it’s having a good pulse of the market, a good sense of what it is that you are trying to accomplish in the marketplace. So are you wanting to take a lot of risk, are you wanting to minimize your risk and avoid losses? Those are all pieces of the planning that are important to what you do.”
