Emory University CIO to Retire | Chief Investment Officer

Emory University’s Chief Investment Officer (CIO) Mary Cahill has announced that she will retire as of Aug. 1, after more than 16 years in the position. Cahill has been responsible for overseeing investments of all endowment, trust, operating, and employee benefit funds of the university and health-care facilities.

“During her tenure at Emory, Cahill built Emory Investment Management, diversified Emory’s portfolio, and implemented a disciplined and structured investment and operating process that led to growth in endowment assets for Emory,” said the university in a statement.

The university said that Christopher Augostini, Emory’s executive vice president of business and administration, will assume oversight responsibility for Emory’s investment portfolio, and launch a search process for a CIO effective immediately. Augostini joined Emory on July 1, after having spent the previous six years as senior vice president and chief operating officer of Georgetown University in Washington, D.C.

While at Emory, Cahill built the university’s first investment organization, including the public markets investors, private market investors, risk management, and administration/operations teams. She developed investment programs for alternatives, including hedge funds, private equities, real estate, and natural resources.

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Prior to joining Emory University in 2001, Cahill had been deputy CIO at Xerox for 10 years. She is currently a member of the NCAA investment committee, the Woodruff Arts Center investment committee, and is also a member of the board of the Robert Toigo Foundation, the Institute for Quantitative Research, and the Emory Center for Alternative Investments. She is also on the pension managers advisory committee for NYSE Euronexxt, and an investment advisory member of The Zeist Foundation, Inc.

Tags: CIO, Emory University, Endowments, Mary Cahill, Retirement

Hossein Kazemi, senior advisor to the Chartered Alternative Investment Analyst (CAIA) Association and professor of finance at the Isenberg School of Management at the University of Massachusetts, Amherst, is making a surprising claim for an alts guy. Kazemi says small endowments should skip hedge funds, private equity, and other illiquid assets in favor of a multi-asset ETF portfolio.

“After going through the research, I noticed some serious issues with the way endowments are being managed,” Kazemi tells CIO magazine. “Endowments report portfolio returns net of fees, but that leaves out the cost to the organization to have staff managing illiquid portfolio assets that aren’t significantly outperforming their benchmarks.”

According to Kazemi, while many endowments have opted to copy either the Harvard or Yale Endowment portfolio mix by including alternative investments, few of them have the same access to top-tier managers that those endowments do, leading to pretty pricey underperformance. When looking at the data, Kazemi says that although there has been a significant effort to add alternative strategies, those allocations haven’t added much diversity; portfolios are still heavily invested in US equities. The only difference is the fees paid for that exposure.

He adds that the allocations within endowment portfolios don’t change much over time, which means that the price for underperformance can actually compound year-over-year if investment teams aren’t consistently re-evaluating how the portfolio is constructed. “Entering and exiting illiquid positions is difficult. Even if endowments are proactive about portfolio management, allocating to illiquid assets can mean foregoing other market opportunities,” Kazemi contends.

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In a recent article on his claim, Kazemi showed that even with access to top-tier managers, Harvard hasn’t been able to beat a basic 60/40 portfolio construction over a one-, five, or 10-year time horizon.

He says that this performance drag is similar for smaller and medium-sized endowments that are copying Harvard’s model. “Overall endowment portfolios are highly correlated to each other; no one wants to get caught out doing something different and being wrong about it,” Kazemi says.

So what should small and medium sized endowments do? Kazemi posits that a portfolio made up of the following ETF mix would provide a consistent return and lower overall costs to endowments.

For Kazemi, this mix provides similar exposures as a combination liquid/illiquid portfolio, minus many of the expenses associated with illiquid assets. He’s started a research experiment to track the performance of the ETF portfolio over time relative to reported endowment returns. “There’s always going to be a place for investing in alternatives, but it depends on portfolio size, manager selection, staffing resources. That’s a big ask for small- and medium-sized endowments. I would argue that this option makes more sense.”

*Image source: “A Simple Model for Managing Endowment Portfolios” – CAIA

Tags: Alternatives, Endowments, ETFs