Smaller university endowments: team characteristics, portfolio composition and performance

Purpose – The paper aims to help explain how certain smaller university endowments are able to provide investment results that are more typical of much larger endowments. Investment teams' characteristics and risk-reward perceptions are examined in relation to portfolio composition and performance. Design/methodology/approach – This exploratory study uses a grounded-theory approach consisting of 20 in-depth interviews of financial officers at US colleges and universities with assets between $100 million and $200 million. Ten were conducted from the top performance quartile and ten from the bottom quartile. Interviews were transcribed and coded; afterward, emerging themes and constructs were identified. Objective investment performance over a ten-year period was employed from a well-known industry survey. Findings – Top-performing endowments were described as having endowment teams with greater investment expertise, efficacy, decision-making independence and learning commitment than teams from the low-performing endowments. Teams from top-performing endowments assessed alternative investments more favorably and made greater portfolio allocations to them as compared to teams from low-performing endowments. Research limitations/implications – Because of the chosen research approach, the research results may not be generalizable. Practical implications – The paper includes implications for colleges and universities in the management of their endowments, and particularly in the selection of committee and other team members. Originality/value – The paper is original in exploring certain team characteristics and practices of institutional investment decision-makers and their relationship to portfolio composition and performance.