Foundation and Endowment Investing.pdf
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1、 Foundation and Endowment Investing Philosophies and Strategies of Top Investors and Institutions LAWRENCE E. KOCHARD, PhD, CFA CATHLEEN M. RITTEREISER John Wiley Meghan Woodhouse for coordination and logistics; and Christine Kelleher for edi- torial feedback and advice. Larry appreciates the suppor
2、t of his entire staff at the investment offi ce and the members of the Georgetown investment committee. Because his students, past and present, inspired him to write this book, he thanks them as well. Sandra Urie and Celia Dallas of Cambridge Associates spoke to us on background and graciously allow
3、ed us to use their original research in the text; Both Tim Barron from Rogers Casey and Dennis Hammond from Hammond Associates had helpful insights as well. Andrea Szigethy of Morgan Creek Capital Management approached certain investors to ask for their participation and read early chapters, giving
4、us valuable feedback. Jason DeSena Trennert, managing partner and chief investment strate- gist, Strategas Research Partners, introduced us to Vinny Catalano, CFA president and global investment strategist with Blue Marble Research and author of Sectors and Styles: A New Approach to Outperforming th
5、e Market. Vinny introduced us to Wiley. We especially want to thank Kevin Commins, the acquisitions editor at Wiley. He decided to publish the book, has supported our ideas, and has worked with us to make it happen. xiii xivACKNOWLEDGMENTS Elden Mayer and Sam Kirschner gave me a copy of their book,
6、The Investors Guide to Hedge Funds, and Sam advised us on how to put together a book like this. Next time, I will do it his way. My dear friends and fellow authors, Dave Singleton and Johanna Skilling, gave me advice and assistance preparing the proposal, interviewing, writing tips, and managing wor
7、kfl ow. Dave also helped introduce the proposal to agents. I paid him back by being The Spoiler. Stephen R. Quazzo of Transwestern Investment Company, LLC, an old friend from Merrill Lynch, had several good ideas and contacts and made an important introduction for us. Jeff Skelton and Michael Henman
8、 at Symphony Asset Management put the wheels in motion. Thanks. Emilie Herman has been patient, helpful, and supportive and deserves a prize for working with fi rst-time authors with full-time jobs. Finally, we thank family, friends, and anyone we forgot. On behalf of Larry Kochard and myself, with
9、great appreciation, Cathleen M. Rittereiser June 8, 2007 About the Authors L awrence E. Kochard was appointed chief investment offi cer at George- town University in June 2004. In addition to serving as CIO, he teaches investment courses for the McDonough School of Business at Georgetown. Previously
10、, Larry was managing director of equity and hedge fund invest- ments for the Virginia Retirement System (VRS) and adjunct professor of fi nance for the McIntire School of Commerce at the University of Virginia. Prior to joining VRS, he was a full-time faculty member at UVA. Before his return to acad
11、emia, Larry accumulated over 10 years of experience in corporate fi nance and capital markets. He currently serves on the investment committee of St. Louis University and chairs the investment committee of the College of William the schools Widener Library occupies part of the site. In 1669, lumber
12、merchants guaranteed the school a payment of 60 pounds per year for seven years and met the obligation by providing lumber products that the school then sold. Today, close to 11,000 separate funds constitute the Harvard endowment, the majority restrictedto supporting specifi c programs such as schol
13、arships, building maintenance, teaching, research and student activities and designated to support that purpose in perpetuity.2 In 1890, Trinity College, a Methodist institution in North Car- olina, had chosen the city of Raleigh over Durham for its new location. Behind-the-scenes maneuvers by Durha
14、m community leaders and family members led Washington Duke to pledge $85,000 for an endowment to locate the school in Durham. With that pledge in hand, Trinitys president, John F. Crowell, secured a donation of land on the western edge of the city. When Duke made the formal offer to the board of tru
15、stees on March 20, citizens of Durham had raised an additional $9,361 to support the school. Trinity College is now known as Duke University.3 Those anecdotes exemplify the origins of modern endowment funds and foreshadow how endowment assets have been acquired, managed, and manipulated for over thr
16、ee centuries. Harvards cow-yard gift displays The Evolution of Foundation and Endowment Investment Management5 several factors that have characterized endowment management, including the generosity and corresponding infl uence of powerful alumni, handling gifts of property or goods, and the naming g
17、ift and matching gift. The prospect of a large fi nancial gift appears to have resulted in the trustees of Trinity College backing out of a commitment to Raleigh, although one could argue that they met their fi duciary responsibility and followed the prudent man rule. Traditionally, committees of we
18、althy, powerful men donated and managed the assets, volunteering their services even when lacking expertise, until 1969, 300 years after the lumber merchants donated their products to Harvard. Powerful, wealthy alumni of institutions or benefactors of founda- tions can still exert enormous infl uenc
19、e over an organization and its investments, but the shift to a more structured, modern, and professional form of investment management began to take shape in 1969. Academic researchnamely, Markowitzs modern portfolio theoryand evidence that excessively restrictive endowment management policies thwar
20、ted asset preservation came to the forefront with two groundbreaking and infl uential studies commissioned by the Ford Foundation. The changes in fi duciary law and investment policy changed endowment management, creating this formidable investor base. Unbeknownst to John Bulkeley and George Downing
21、, their cow-yard donation would form the cornerstone not only of the Widener Library, but also of a powerful, infl uential institutional investment community led by prestigious, professional, talented, and accomplished CIOs. CATALYSTS OF CHANGE Toward the end of the 1960s, McGeorge Bundy, then the h
22、ead of the Ford Foundation (a leading donor to education), became concerned about the rising costs of higher education. He began to study the management of endowment assets to determine if they could be managed more productively and, if so, to assist in alleviating the problem. At the time, these as
23、sets tended to be managed by wealthy trustees guided by personal trust law. Funds were not commingled in investment vehicles, trustees were forbidden to delegate investment decisions, and rules limited the endowments to spending only dividend and interest payments. The funds were managed to generate
24、 current yield and to maintain principal over time and invested in bonds and other fi xed-income vehicles rather than equities. The use of cost accounting, recording the price of a security when purchased and adjusting the value only when sold, obscured the fact 6FOUNDATION AND ENDOWMENT INVESTING t
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