Anne Dinneen, one of the youngest CIOs in the endowment space, is making big changes at Hamilton College, located in the upstate town of Clinton, New York. Since she started in May 2015, Dinneen has repositioned the $1 billion endowment to access the global opportunity set, embrace alternatives, and diversify the fund to achieve superior risk-adjusted long-term returns.

Recruited to Hamilton from the James Irvine Foundation where she worked as director of investments, the college said it was pleased to have attracted someone of her talent and skill to ensure Hamilton’s financial future. The Princeton economics and Wharton MBA grad had also done stints at Barclays Global Investors, Thomas Weisel Partners, and Banc of America Securities.

Dinneen immediately re-underwrote Hamilton’s strategic asset allocation policy in 2015, bringing exposure to long-only public equity down significantly, from almost 70% in May of 2015 to a target of 45% today. Given her quantitative background and history at BGI as a quantitative portfolio manager, Dinneen built the college’s asset allocation model in-house so that it was tailored for Hamilton’s needs and investment mandate.

Dinneen led the endowment through a major transition, establishing an independent, de novo investment office based off-campus in Greenwich, Connecticut. She also focused on the importance of a well-run and technology-centered back office, conducting a major operational overhaul and implementing new systems, databases, custodial relationships, and policies to allow her to leverage the skills and time of her investment team.

From there, the CIO has been able to access niche strategies that offer uncorrelated return streams and hedges to the main source of risk for her endowment, equity. With the ability to take “small bite sizes and target small funds,” Dinneen has incorporated investments that are often off the beaten path or not found in many larger, endowment portfolios. “As access becomes harder and harder for institutional investors, I believe it is sometimes necessary to be early to opportunities,” she said.

In so doing, she built out the private equity program at Hamilton, with a focus on lower-mid market buyout and venture capital.

“Building out a private equity program was been a major undertaking, to both access superior opportunities and manage the associated J-curve and illiquidity risk for the portfolio,” Dinneen told CIO. From the portfolio management perspective, moving massive amounts of the endowment from public to alternative vehicles requires a focus on liquidity that has been challenged by the recent return profile of fixed income.

It took creativity on her part to build out an absolute return portfolio to play the historic fixed income role, using derivatives or passive investments to manage exposure through the restructuring. In addition, she has bridged the liquidity gap by optimizing the college’s capital structure through the retirement of tax-exempt debt and issuance of guaranteed credit lines—providing liquidity for the college while maintaining debt ratings.

She has focused extensively on venture capital as she believes innovation is a necessary exposure for long-term-oriented investment programs. That said, she also appreciates the risk associated with venture capital investing and the necessity of playing with the right groups in this asset class. With a 10-year track record in the Bay Area investing in venture capital at The James Irvine Foundation, Dinneen leveraged her long-standing relationships with the West Coast venture community to establish a strong venture program for the Hamilton endowment.  In addition to partnering with long-standing name brand funds, Dinneen has also been comfortable investing very early with groups, often as the first investor. This is already proving to be transformative for the Hamilton endowment.

Dinneen also believes in global diversification across asset classes. During her tenure, the Hamilton endowment has deliberately moved into emerging markets both publicly and privately, which served the college well over the past three years. (Prior to her tenure, the Hamilton endowment had a long-only US equity orientation.) The endowment’s general direction had been toward large, well-established public equity managers, fund of funds, and a handful of older vintage US private equity partnerships. Since Dinneen’s arrival, she has committed to 28 new managers, diversifying the endowment away from long-only public equity and embracing the global opportunity set. “While long-only public equity has served the endowment very well through the 10-year bull market, the endowment is now less dependent on public equity markets and better positioned for different macroeconomic environments as long-term investors through cycles,” Dinneen said.

Performance of the Hamilton endowment under Dinneen’s leadership has been in the top quartile for the past three years, serving to maintain the purchasing power of the endowment while supporting 30% of the Hamilton operating budget. The endowment returned 10.4% for FY18 (top quartile for all colleges and universities is 9.4% and 8.8% for all endowments and foundations based on Cambridge Associates Data). While she is in the beginning stages of a multi-year transition for the endowment, the Hamilton Investment Committee believes she is building a best-in-class investment office with a strong endowment program.

By Christine Giordano