Invest Better in Colgate

PATHS FORWARD

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The real question isn’t whether Colgate should try to beat the market or simply match it. Either can work. The question is whether Colgate has the expertise, resources, and accountability to execute the approach it chooses. After a decade of poor results, the Board has announced no change. ​

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Other schools adapted years ago. There are several legitimate paths, each with successful real-world examples:

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Build a professional in-house team. As Wesleyan did in 2010. The record of full-time teams led by skilled endowment managers is remarkable: every Yale protégé profiled by the New York Times in 2016 who took the helm of a peer school's endowment went on to produce top-quartile ten-year performance, save one, a few notches below at 33 of 122. Brown took a different route - a leader from outside the Yale tradition, an excellent team built from scratch - and now ranks #1 among peers. The common factor isn’t pedigree or location (Amherst’s team is in Boston, Hamilton's is in NYC). It’s full-time, well-trained people who answer for the results.

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Hire a professional outside firm. Colorado College did exactly this, converting from the committee-and-consultant structure Colgate still uses to a discretionary outsourced CIO. It now ranks 38th of 123 in ten-year investment return, about fifty places ahead of Colgate, with no internal investment office at all. Middlebury has used the same model since 2005. Firms like TIFF, Cambridge Associates, Investure and Partners Capital do this for universities that don't want their own teams. Performance varies, among firms and even among teams within a firm, so selection matters as much as the decision to outsource. But the option is real, and the better firms have strong long-term records. ​

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Match the market at low cost. A diversified, low-cost portfolio built for a long horizon is a legitimate choice for any institution that prioritizes simplicity, liquidity, and cost. Over the past decade this approach would have beaten most endowments - including Colgate’s.

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Whichever path, the governance gets written down

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Colorado College’s approach, again, is instructive: it publishes its investment policy statement. It names the components of its policy benchmark and their weights, reviewed annually and measured quarterly. It publishes the asset allocation with market values by class, the spending policy, and returns against that benchmark. It sets out in a table who does what: the outside advisor selects managers and rebalances the portfolio, the Investment Committee selects the advisor and approves the policy. And it requires any trustee conflict of interest to be disclosed, reviewed, and presented to the full Board.

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None of that is a resource question. Colorado College has no investment office. It is a decision to write the rules down, publish and follow them.

 

Each path looks different, but all require the same thing: professional management, transparency for stakeholders, a clear division of duties, and the governance to change course when necessary. Instead, we have the worst of all worlds: an expensive strategy, poor returns, and no announced plan to fix it.