Key Takeaways
- • The University of Cincinnati's Endowment, whose main pool (Fund A) was created in 1934, moved its investment management in-house in 1976 under an Administrative Investments Committee after previously outsourcing to third parties.
- • UC and the UC Foundation commingled and unitized their assets into Fund A in 2001, producing investment management fee savings and administrative efficiencies.
- • UC hired Thomas Croft as its first Chief Investment Officer in 2005; Karl Scheer succeeded him in 2011 and has continued restructuring governance, diversifying holdings, and shifting from funds of funds to direct fund investments.
- • The Endowment grew from $70 million in 1977 to over $1 billion, according to the university's own account.
Summary
The University of Cincinnati has published an account of the history of its Endowment, which describes three decades of changes to investment process and governance. Before the University joined the state university system of Ohio, the investment of the Endowment's main pool of assets, Fund A, which was created in 1934, was outsourced to third parties. In 1976, management was brought in-house under an Administrative Investments Committee led by then-Vice President of Finance Sigmund Ginsburg, Controller Gordon Penning, and economics professor Tim Johnson. The move also led the University to form the University of Cincinnati Foundation (UCF) to cultivate private donations.
During the late 1980s and 1990s, the University modernized its spending approach, moving from spending current income on the portfolio to a policy of spending 6% of the trailing three-year average value, later reduced to 5% of that average. The Administrative Investments Committee also continually increased the diversification of the Endowment's assets during this period.
In 2001, the University and the UC Foundation agreed to commingle their assets into Fund A and unitize the fund, a structure similar to a mutual fund. According to the account, this produced a coordinated investment structure, investment management fee savings, and administrative efficiencies. In 2005, UC established an investment office and hired Thomas Croft as its first Chief Investment Officer. Croft served until 2011, when he retired and was succeeded by Karl Scheer. Scheer has continued restructuring the Investment Committee's governance, hiring experienced staff, further diversifying holdings, migrating the portfolio from funds of funds to direct investment in funds, and adopting a formal investment policy statement.
In 2011, the University also strengthened the operational side of the program by hiring Treasurer Gary Hunt, creating an Assistant Treasurer position overseeing investment operations, reporting, and compliance, and moving the Endowment's and Temporary Investment Pool's custody to a single master record keeper and custodian. The account credits donors and internal stewardship for growing the Endowment's asset base from $70 million in 1977 to more than $1 billion.
During the late 1980s and 1990s, the University modernized its spending approach, moving from spending current income on the portfolio to a policy of spending 6% of the trailing three-year average value, later reduced to 5% of that average. The Administrative Investments Committee also continually increased the diversification of the Endowment's assets during this period.
In 2001, the University and the UC Foundation agreed to commingle their assets into Fund A and unitize the fund, a structure similar to a mutual fund. According to the account, this produced a coordinated investment structure, investment management fee savings, and administrative efficiencies. In 2005, UC established an investment office and hired Thomas Croft as its first Chief Investment Officer. Croft served until 2011, when he retired and was succeeded by Karl Scheer. Scheer has continued restructuring the Investment Committee's governance, hiring experienced staff, further diversifying holdings, migrating the portfolio from funds of funds to direct investment in funds, and adopting a formal investment policy statement.
In 2011, the University also strengthened the operational side of the program by hiring Treasurer Gary Hunt, creating an Assistant Treasurer position overseeing investment operations, reporting, and compliance, and moving the Endowment's and Temporary Investment Pool's custody to a single master record keeper and custodian. The account credits donors and internal stewardship for growing the Endowment's asset base from $70 million in 1977 to more than $1 billion.
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