Washington Post – How does someone put $425 million of a university’s hard-earned endowment into hedge funds, corporate buyout partnerships and real estate?
Very slowly and carefully.
That’s how Lawrence Kochard is approaching his job two years after Georgetown University hired him as chief investment officer of its $850 million endowment. The university has set a goal of investing 50 percent of the fund’s assets in these “alternative investments” — which generally means anything other than conservative investment-grade bonds and traditional positions in stocks. When Kochard was hired, Georgetown didn’t have any alternative investments.
Kochard’s task isn’t unique. Endowments across the public and private spectrum of universities and foundations have been pouring money into hedge-fund and private-equity partnerships to boost returns, trying to mimic the multibillion-dollar investment successes of the huge endowments at Yale and Harvard universities. Such investment vehicles have been producing unprecedented returns in recent years.
Private equity firms — such as venture capital and corporate buyout funds that specialize in five-to-seven year investments in private companies — are expected to raise a record $300 billion this year, up from about $260 billion last year, according to research firm Private Equity Intelligence. A good portion of that fund growth comes from endowments.
