A small Board of Trustees committee made up of veteran investors has nearly doubled the College’s endowment during the last five years by employing a more aggressive and, at times, riskier investment strategy.
The Investment Committee, chaired by David Henle ’75, has helped grow the College’s endowment from $245 million in 2002 to more than $400 million today. The annual rate of investment return for Union’s endowment during the last five years has ranked in the top 15 percent of a group of 247 peer institutions, according to the Wilshire Associates Endowment Universe. The growth has vaulted Union’s endowment well above the average among peer institutions but still below colleges like Hamilton College and Middlebury College.
of Union’s Accolades magazine, featuring a story about the David L. Henle Merit Scholarship for exceptional students. Union College magazine, Summer 2008.
Union College magazine recently spoke with Henle, who worked at Goldman Sachs for 25 years, led its private wealth management effort for nearly 10 years and today heads the investment firm DLH Capital. The interview covered specifics like smart endowment investment strategies and how they connect with broader topics such as the College’s Strategic Plan and improving alumni giving.
“For a college the size of Union, I think that the expertise that is embodied in the Investment Committee is as good as any college in the country. This committee does very substantive work that reflects directly on the future of the College,” Henle said.
Q: Why is endowment growth critical to Union’s future?
A: All of us on the Investment Committee know how critically important the endowment is. Said simply: The committee understands that colleges like Union live and die by the amount of resources they are able to bring to bear. And resources are a function of money. Whether it’s scholarships or faculty salaries, these types of things are dependent on resources, and resources are dependent on the endowment.
Colleges like Union should be focused on trying to attract the best and the brightest students, in part, by giving them some amount of financial support. To attract the best student body, Union must mitigate the burden put upon students upon graduation. To do that, we’ll need to steadily build up the endowment.
Q: What investment strategies have helped grow Union’s endowment?
A: We have taken a more aggressive equity exposure, which means we have taken our fixed income down over a period of time. Within that more aggressive move toward equities, we have also embraced alternative managers, namely, hedge fund managers. That has been the biggest change and it has created a better dynamic for us.
Different asset classes have different risk profiles; for instance, if you just own cash, that’s not a volatile asset but it will also have the lowest rate of return. On the other end of the spectrum, you have highly illiquid private equity investments that are expected to provide significant returns. The Spring 2006 issue of Union’s Accolades magazine, featuring a story about the David L. Henle Merit Scholarship for exceptional students.
So, part of the committee discussions revolve around the questions: How are our assets allocated? Do we want them in alternative equity management products like hedge funds or in private equity? Such discussions are the building blocks of the endowment’s risk profile.
Once we’ve agreed on an asset class, we select which individual managers will represent Union’s endowment in that class. That’s where we spend a majority of our time.
The committee believes Union can be somewhat more aggressive in its investments. We are taking intelligent risk and we are doing so because we understand that the endowment can afford to take a long-term perspective. It can endure a greater amount of short-term volatility.
We have a team of people on the committee who are tremendously effective.
Q: What role do alumni play in growing the endowment?
A: I think the College can do a better job staying connected with alumni, beginning from the day that they graduate. We are trying to create in them more of a sense of wanting to give back to the institution.
Alumni participation is critical, in my view, to how the endowment will likely grow or not grow over the next five to 10 years.
And I believe that some amount of endowment giving is based on confidence in how that money will be managed. And to me, it seems obvious that the more confidence that those people have in how those resources are being managed, the more likely they are to give.
Q: Why do you give your free time and investment expertise to help Union?
A: I love the College and I have always felt a sense of wanting to give back.
Second, my background has been in the investment world and I’d like to think that I bring a certain amount of expertise and knowledge base that can be helpful in the investment process. That’s why I am engaged to the extent that I am. It’s both a matter of wanting to give back and taking a real sense of enjoyment and satisfaction out of doing it.
I feel the College has some powerful momentum right now. I think President Stephen Ainlay is terrific. He is a doer. He’s a catalyst. He’s connected to students. And he’s passionate about Union.
Also, I think the Board of Trustees Nominating Committee has done a good job of bringing in board members who have fresh ideas, who care about the school, who are engaged. I think the College has been gathering more and more momentum every year since I began serving as a trustee in 2004.
That momentum ultimately translates into whether or not people support the school. The simple fact is: If people take pride in Union’s reputation— everything from its athletics to its academics—and they feel the College has momentum, they’ll be much more likely to give. The endowment’s growth is one sign of momentum, and it’s a critical piece of maintaining the College’s top-tier reputation.