Cambridge Aims For Ivy Treasures

CORRECTION APPENDED

The University of Cambridge has hired a professional manager to steer its $2.33 billion in assets, making it the first British university to adopt an American-style strategy for its endowment, the U.K. university announced yesterday.

The move was spearheaded by the university’s vice chancellor Alison Richard, a prominent figure in higher education deemed to be a potential candidate for Harvard’s presidency, and comes as Cambridge seeks to make itself more competitive compared with its peer institutions across the pond.

The school tapped Cambridge graduate Nick Cavalla—currently chief investment officer of Man Global Strategies, one of the world’s largest hedge fund companies—to be its first professional in-house manager. Cavalla will be responsible for selecting external managers in a role similar to that of Yale University’s David F. Swensen, who has been advising Cambridge on the transition.

Until now, the university has outsourced all of its financial management to multiple firms, including London-based Foreign & Colonial Investment Management Ltd.

Cambridge’s entire war chest amounts to $7.95 billion, but two-thirds of this is owned and managed autonomously by its 31 colleges, complicating attempts to centrally manage its funds. The total figure still pales in comparison to Harvard’s $29.2-billion and Yale’s $18-billion endowments.

The new chief investment officer is expected to direct the university’s asset allocation away from the current emphasis on traditional equities to hedge funds and private equity, moving closer to American universities’ strategies.

Harvard’s Olshan Professor of Economics John Y. Campbell lauded Cambridge’s move.

“I think you want to have top talent that works for the university in order to ensure that when you hire outside managers you’re getting the best possible deal,” said Campbell, an Oxford graduate.

“You also need a first-rate person to make decisions about asset allocation. It’s very hard to outsource that.,” he added.

Richard, the Cambridge vice chancellor, told the Financial Times she hoped the restructuring of the endowment’s management will encourage donors to open their checkbooks and contribute to Cambridge’s fund.

But Campbell said that while Oxford and Cambridge have become more serious in their pursuit of alumni support, there is not as strong of a “culture of philanthropy” in the United Kingdom compared to that surrounding American universities. Ten percent of Cambridge and five percent of Oxford graduates donate to their alma mater, according to Bloomberg, compared with 40 percent for Harvard in fiscal year 2005.

Harvard Management Company president and Chief Executive Officer Mohamed A. El-Erian, who holds a degree from Cambridge, also welcomed his alma mater’s decision.

“Cambridge University’s move is an important one. It is part of a larger phenomenon of institutions seeking to implement more complex investment strategies as a way of enhancing returns on their financial assets,” El-Erian said.

The move to a new endowment structure comes amidst a one-billion-pound capital campaign initiated by Richard, who is British.

As she brings Cambridge closer to an American model, others are conjecturing whether she may be preparing to return to this side of the Atlantic.

Richard, an anthropologist and expert on the Madagascan lemur, holds an undergraduate degree from Cambridge University and doctorate from London University. She later joined the faculty at Yale, and eventually rose to the post of provost in her 30-year career there. Richard was the first full-time female vice chancellor in Cambridge’s 800-year history, according to the University of Cambridge Web site. A former professor of Richard’s said she would be a good candidate for Harvard’s top post.

“I assume since she was successful enough as provost at Yale to be courted a vice chancellor at Cambridge, she’s very much the sort of person that would do well as a university president here.” said Ford II Professor of Human Evolution David R. Pilbeam, who taught Richard as an undergraduate at Cambridge in the late 1960s.

—Staff writer Cyrus M. Mossavar-Rahmani can be reached at crahmani@fas.harvard.edu.

CORRECTION: The print and original online versions of this article incorrectly stated that Richard was the first female vice chancellor of the University of Cambridge. In fact, Dame Rosemary Murray was the first woman to hold the post.