College creates new position to manage endowment

Over this past summer, Lafayette named Joseph S. Bohrer as the college’s first chief investment officer to manage the college’s increasing endowment.

As a college’s endowment grows closer to $1 billion, it is common for many colleges to hire a professional manager, according to President Alison Byerly. As of the end of September, the college’s endowment stands at $865 million, the highest it has been since 2000.

“What Lafayette is doing is bringing it in line with what most colleges and universities who have large endowments are doing,” said Bohrer, who was previously an asset management director at the Alfred P. Sloan Foundation. “It’s regarded as best practices for managing an endowment.”

Before July 1, when Bohrer assumed the position, the endowment was managed by the investment committee within the Board of Trustees. The members of the investment committee did not work with the endowment full-time.

Byerly said that the endowment has become more complicated as it has grown and may benefit from this new type of management.

“A system that worked very well when the endowment was at three or four or $500 million looks a little different when you get up in the neighborhood of $860 million,” she said. “The college can realize even greater value from its endowment when it is managed full time by someone who is devoting 100 percent of their attention to the task.”

The endowment is the college’s primary source of funding and begins as gifts from donors, such as alumni. The investment office is meant to manage these funds and ensure the college can withdraw funds with financial security.

“What [managing the endowment] doesn’t mean is investing in individual stocks and bonds myself,” Bohrer said. “What it does mean is deciding on an asset allocation: how much we’re going to have in stocks, how much we’re going to have in bonds, how much we’re going to have in other types of assets and strategies.”

According to Bohrer, the college withdraws about five percent of the endowment every year to support the annual expenses. The investment office must maintain a rate of return of at least five percent without adjusting for inflation.

“If you think of five percent as a kind of hurdle rate, and then you add inflation on top of that,” Bohrer said, “you need to be generating pretty good returns so that the endowment will grow or at least remain steady in real terms over the next 10 years, 25 years, 50 years.”

Bohrer said that his office also has an obligation to the students in the decades to come, and that the actions of his office should reflect this “dual mandate.”

“[The goal] is to meet the current spending needs, but then in addition to that hopefully to grow in real terms…over the very long term,” he said.

The size of the endowment and the newly created professional team mean that the endowment can be managed differently.

“We can probably do some things that would have been difficult to do when the endowment was managed by the investment committee,” Bohrer said. “It’s partly a function of the size of the endowment, but it’s equally a function of having a small group of people who are dedicated to doing that on a full time basis.”

For example, the office can hire more investment mangers who will specialize and focus more on specific markets and types of investments, according to Bohrer. Byerly said the new investment office also has the ability to respond quicker to changes in the market.

The investment committee will continue to direct Bohrer and the investment office, but the office, which is located in New York, will manage and execute the policies.

Bohrer feels optimistic about his first six months in the new position.

“The markets have been pretty exciting,” he said. “I feel pretty good about it. There’s a lot to be done, but I think its a good start.”

About Ian Morse

Ian '17 was the managing editor of The Lafayette. He wrote on topics including money, student life and crime. He studied history & math-econ.

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