Somewhere in the middle of Iowa, a tiny little college’s endowment is outperforming the Ivies.
Grinnell College, a liberal arts school, posted a 20.4% return on its $1.8 billion endowment in 2014, tying it with the University of Minnesota for the best one-year performance among the largest 100 U.S. colleges, MarketWatch reports. Grinnell’s endowment finances about 55% of the school’s yearly operating budget, and is run by 38-year-old Scott Wilson. The endowment has grown from $1.3 billion when Wilson, a Grinnell alumnus, became director of investments in 2010.
Wilson says the Grinnell strategy is to focus on just one or two great investment ideas each year, rather than spread the small investment team thin by looking for 100 great ideas. The Grinnell endowment team also outsources about 80% of its funds, including the stock portfolio, to external asset managers. Wilson focuses on bonds and private investments in-house. The overall portfolio is about 45% stocks, 45% alternative investments and 10% cash and fixed income.
For a small school, it’s almost appropriate that Wilson is all about thinking small. The endowment doesn’t like macro money managers and big-picture investing, instead they pick outside managers with good, repeatable performance. “Most of the daily moves in the financial markets are noise,” he said. Wilson considers Grinnell overexposed to equities right now, and is moving more money into alts, including hedge funds, private equity, and venture capital. Wilson isn’t afraid to look outside of the U.S. either, and and includes private equity investments in Africa as some of his most attractive. Writes MarketWatch:
“The push outside the U.S. paid off with outsize returns in recent investments in Asia and Europe,” said Wilson. “Most of our Africa investments are too soon to tell, though we think they are very compelling.”
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