November 9, 2007

Cornell CIO Charts Growth of The University Endowment

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The University’s endowment is doing well, with exceptional investment returns over the past few years, according to James Walsh, Cornell’s chief investment officer. Walsh, who is responsible for managing the University’s endowment, discussed investment strategy, the investment process and his own background but did not address recent student pressure for socially responsible investment last night in a presentation in Sage Hall.
Walsh told an attentive and intimate audience of nearly 25 undergrads that over the past few years, “[Cornell’s] investment returns have been fantastic.”
The presentation, sponsored by this semester’s Delta Sigma Pi pledge class, was part of a series of professional events the business-oriented fraternity has hosted this semester, according to Omar Qureishi ’09, Delta Sigma Pi vice president, professional.
Walsh, who became CIO in Sept. 2006 when Don Fehrs ’77 retired, described the Cornell endowment that totals about 6 billion dollars as “nimble” compared to the 150-billion dollar pension investment fund he formerly managed in the United Kingdom. He said the size of Cornell’s assets and its extensive alumni network have proven advantageous in growing the University’s endowment.
“Endowments as a whole have a fantastic reputation. They have a reputation of being leading-edge investors. That’s why I came here [to Cornell],” Walsh said.
Walsh, who reports to the Investment Committee of the Board of Trustees, also described in his hour-long lecture how his office works. The Cornell Investment Office explores new investment opportunities and keeps track of where current assents are invested, he said.
“We seek out the best managers of [investment firms], undertake due diligence on meeting them and monitor investment managers across the asset classes,” Walsh said. “On an average year, we will call or visit about 1,400 managers across the world from New York to London to Hong Kong,”
“The investment office has changed dramatically over the past 4 or 5 years,” he added, citing an increased number of investment and operational staff and a changing investment strategy.
The University has decreased its investment in stocks and bonds and has increased alternative investment. Over the next few months, Cornell will continue to invest in real estate and private equity, both of which have recently enjoyed “astronomical” rates of return. In addition, Walsh said Cornell is diversifying internationally, in Eastern Europe, for example.
The Sun reported last month that the University’s endowment was criticized by the 2008 College Sustainability Report Card, in which it received a D in endowment transparency and a C in shareholder engagement. In response, several student groups urged investment in sustainable businesses.
Walsh said that there are currently no plans to divest or change investment strategy for social or environmentally sustainable reasons. The last time the University changed its asset allocation based on social pressure was when Cornell divested from Sudan in the summer of 2006 because of the ongoing genocide in the African nation.
Any such change, he added, would come from the Executive Vice President for Finance and Administration, Stephen Golding.
The investment office constructs Cornell’s investment portfolio both quantitatively and qualitatively, according to Walsh. The team seeks to make investments in strong, innovative businesses where people are passionate about what they are doing.
While Walsh’s presentation included a host of technical statistics, he seemed to engage most students in the small lecture hall.
“I was impressed by how a small investment office can manage assets so well and the diversity of allocation. He mentioned a lot of alternative investments, some of which I had never seen like global energy and investment in Russia,” said Ben Schreff ’10, president of the Delta Sigma Pi pledge class this semester.