Macalester College Endowment to Outsource Investment Management

The school is shuttering its internal investment office and transferring its duties to management firm Investure.



Macalester College, a private college in St. Paul, Minnesota, announced it will outsource its endowment’s investment management for the first time in its history.

The college this month announced that on September 1, it will shut down its internal investment office, which has been responsible for investing the endowment’s assets since 2002, and transfer management to Charlottesville, Virginia-based investment manager Investure LLC.

As of the end of March, Macalester College’s endowment had an asset value of approximately $877 million. According to the college’s website, 85% of the endowment’s assets were managed externally by about 48 different firms, while 12% of its portfolio—in Treasuries and cash—was managed in-house. Cambridge Associates was the endowment’s investment consultant.

“While this will be a new experience for Macalester, it is common for colleges and universities to work with private firms to manage their endowments,” said Macalester Board Chair Carrie Norbin Killoran in a statement. “This strategic shift in our investment approach has been made with one overarching goal in mind: to deliver consistent performance that grows the endowment’s assets over time.”

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According to the announcement, the endowment’s board of trustees made the decision with the aim of delivering “risk-adjusted endowment performance with greater access to top-tier fund managers.” While Investure will oversee the endowment’s investment management, the board’s investment committee will continue to approve asset allocation and risk tolerance policies, as well as parameters for how the endowment’s resources are invested. The committee will also retain primary oversight authority, and Investure will report to the college’s chief financial officer for day-to-day operations.

“The firm has experience with and a sensitivity to divestment requests that occasionally arise on college campuses like ours,” said Killoran of Investure. “In short, Macalester gains access to more top-performing investment opportunities while retaining a level of flexibility necessary for our community.”

Investure manages approximately $18 billion of assets for other endowments and private foundations, with a focus on colleges and nonprofit organizations. Its college clients include Dickinson College, Haverford College, Franklin & Marshall College, the University of Denver and Middlebury College, among others. Its nonprofit clients include the Carnegie Endowment for International Peace, the National Academy of Sciences and the Woods Hole Oceanographic Institution.


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Where Is the 10-Year Treasury Yield Headed? It’s Hard to Say

As the Fed prepares to lower short-term rates, the T-note confounds predictions due to its recent volatility.

What will happen to the 10-year U.S. Treasury yield, now that the Federal Reserve appears intent upon cutting its benchmark short-term rate? That is really hard to say, because, among other things, the 10-year yield has been so volatile.

The 10-year has been on a wild ride, with its yield starting 2024 at 3.95%, climbing to 4.7% by spring (when people were more leery of persistent inflation than they are now) and lately falling back below its January starting point, at 3.8%. The 10-year is more subject to market forces than are short-term bonds, over which the Fed has greater control.

The Fed raised short-term rates robustly during a 16-month period that ended in July 2023. Now, though, the bond market expects a series of rate cuts from the Federal Open Market Committee starting in September, which Fed Chair Jerome Powell has broadly suggested.

“Ultimately, declining yields on the long end of the bond market reflect long-term inflation and economic growth expectations,” commented Rob Haworth, senior investment strategy director for U.S. Bank Wealth Management, in an analysis. “The short end of the yield curve has mostly held steady, more directly anchored to the Fed’s stance on the fed funds rate.”

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The upshot is an inverted yield curve over the past two years. (The inversion classically has been a recession portent, but that outcome thus far has not occurred.) The 10-year now yields about 1.4 percentage points fewer than the three-month Treasury bill.

Lower rates will have many salutary effects on consumers; mortgage rates, for instance, are likely to decline. For pension funds, the value of the bonds in their portfolios will no doubt increase.

On the other hand, sponsors may well end up having to contribute more to their funds, because, when interest rates drop, liabilities (the discounted value of future cash flows) often rise.  Asset allocators use a discount rate linked to long-term rates when calculating liabilities. 

The big swings in the 10-year yield appear to be rooted lately in crowd psychology more akin to the stock market than the bond market. In short, bond investors’ perceptions have been flawed, wrote Thomas Aubrey, the founder of consulting firm Credit Capital Advisory, in a commentary.

“The market assumed that the U.S. economy was heading for a recession and required more accommodative monetary conditions,” he argued. “This negative outlook has been influenced by the pervasive loose monetary policy that was put in place in 2009, with investors believing that the economy needs lower interest rates in order to function.”

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