NYU Appoints Michelle Knudsen as CIO of $5.9B Endowment

The investment chief is moving from the Mellon Foundation.

Michelle Knudsen. Photo: Camila Falquez for the Mellon Foundation

New York University announced on Tuesday that it had appointed Michelle Knudsen as the new CIO for the organization’s endowment, succeeding Kathleen Jacobs who stepped down from the role in October to become CIO at RWJBarnabas Health.

Knudsen’s appointment will be effective at the end of June 2024. 

“We look forward to welcoming Michelle Knudsen to NYU,” said Traci Lerner, NYU Trustee and chair of the board’s investment committee in a press release.  “Her selection was the outcome of a thorough, global search, and we are thrilled to have her joining us. She impressed the Search Committee with her intellect, creativity, energy, and insight.  We believe she will make an enormous contribution to NYU as both our CIO and as an engaged member of our community.”

Knudsen is currently a senior portfolio manager of The Andrew W. Mellon Foundation, an $8.1 billion foundation which provides grants supporting arts and culture, higher learning, humanities and public knowledge, where she managed the endowment’s investment analysts.

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The NYU endowment had $5.9 billion in assets as of August 31, 2023. The fund has returned an annualized 7.1% over the past 20 years. Distributions from the endowment provide 4% of NYU’s operating budget.

“NYU’s endowment is among the 30 largest university endowments; the resources it provides are incredibly important to the University and require an especially qualified and talented professional to be our CIO. In Michelle, we have found such a person,” said NYU Executive Vice President Martin Dorph in a press release. “She brings excellent experience to the position and impressed me and members of the Investment Committee with her insights, her understanding of NYU’s needs, and her team management skills.”

Prior to her role at the Mellon Foundation, Knudsen was the head of absolute return and credit strategies at Partners Capital LLP, where she worked for nine years. Previously, she was also an investment analyst at Goldman Sachs. Knudsen holds a Bachelor of Arts in political science from Stanford University.

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Emerging Market Bonds, on a Roll, Should Do Even Better, Says Ned Davis

Firm commodities prices and expected EM growth are tailwinds, the research firm contends.  

Emerging market bonds have done well over the past year and will continue outperforming “in coming months,” according to a report from Ned Davis Research.

Since early 2023, the bonds of these developing nations, both sovereigns  and corporates, have outpaced the Bloomberg Global Aggregate and the U.S. Agg. The prospect of a somewhat weaker dollar, once the Federal Reserve finally cuts interest rates, would further fuel EM bonds, reasoned Joseph Kalish, chief global macro strategist at Ned Davis, in the report.

EM bonds’ total return outpaced that of the global Agg by 2.7 percentage points this year, up from 2.1 points in 2020, the low for this decade. Some of this has come from a rebound in commodity prices—and raw materials are a big deal for EM economies—but growth in manufacturing and other non-commodity sectors is increasingly important for developing countries.

In addition, Kalish observed, “The fact that EM has been able to outperform in the face of a firm U.S. dollar is a testament to its underlying strength.” A strong dollar historically has hindered EM economies because they need outside capital. This capital is harder to come by when it is rushing into U.S. investments to take advantage of higher rates that usually result from a robust greenback.

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But if U.S. rates decrease, as is widely anticipated, that typically would weaken the buck. The probability of dollar depreciation in the near future is around 75%, with a modest decline of 1.1% annualized as the most likely outcome, per an analysis by the Vanguard Group.

Also helping EMs are low defaults on their fixed-income securities. According to the Ned Davis report, this shows up in the low pricing to insure EM bonds. In the past year, the spreads between bond prices and those of credit default swaps have narrowed by half, the Davis paper pointed out.

Once the Fed eases, expectations are that EM central banks will follow, aiding their economies’ growth. The Central Bank of Brazil, for instance, already has cut the benchmark Selic rate by a half-point to 10.75% in March. That reduction is aimed at bolstering economic growth in Brazil

Among the biggest winners have been Indian bonds. Over the past 12 months, the S&P BSE India Bond Index has climbed 7.2%. The Bloomberg U.S. Agg, covering Treasurys and investment-grade corporates, is up just 2.5% for the period.

Indian bonds stand to improve still more, as the Reserve Bank of India is poised to cut rates (although it likely will wait until after the Fed decreases them, a Bloomberg survey of economists found). While other EM currencies have slumped in the face of a strong U.S. dollar, India’s currency has not, owing to a very optimistic outlook for its economy, which is up over 8% yearly.

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