(Bloomberg Markets) -- The old boys’ network is costing university endowments money. Investment committees that have female majorities typically generate higher returns than committees that don’t.
“There’s something about the way women lead and the way they collaborate,” says Jolyne Caruso-FitzGerald, a 35-year Wall Street veteran and chair of the board of trustees at Barnard College, a women’s school in Manhattan. “There’s this intimidation factor on mostly male boards. They have a way of shutting down women. I wish people would just look at the data.”
To get an idea of what can happen when women make investment decisions, take a look at the Seven Sisters, a group of historically women’s colleges in the U.S. Northeast. Women hold almost 80 percent of the seats on the schools’ investment committees, according to data compiled by Bloomberg. In comparison, on state university foundation boards, whose duties include overseeing endowments, women on average held only a quarter of the seats in 2015, according to a report from the Association of Governing Boards. The Seven Sisters, which includes Barnard, reported an average 12.5 percent investment return for the year ended June 30, 2017, data compiled by Bloomberg show. The national average was 12.2 percent for the period, according to the National Association of College & University Business Officers.
In financial circles, it’s common to hear that the most important consideration is money—that the keys to the kingdom are available to anyone who can deliver a beefy return on investment. But that’s not necessarily the case when it comes to women and many finance jobs. Despite the data, women are underrepresented on committees that decide where endowment money goes.
Endowments are big business. They invest donations, supplement operating budgets, pay for capital improvements, and chip in with tuition payments for needy students. In the U.S., endowment assets total $567 billion, from Harvard’s almost $40 billion endowment to the $185 million fund at Lesley University, a neighboring school in Cambridge, Mass.
U.S. universities certainly talk the talk when it comes to diversity. Ninety-two percent of endowments and foundations agree that diverse committees drive successful investment programs, according to a 2015 study conducted by consulting company NEPC LLC. But those schools fall short when it comes to walking the walk. Diversity was ranked sixth out of seven optimal qualities when new committee members are selected (with the top consideration being investment knowledge) in the survey.
Disparities exist just about everywhere. At Barnard, six of the seven members of the investment committee, which manages $327 million, are women. At co-ed Ivy League school Columbia, where Barnard students also take classes and share facilities, the eight-person group that oversees the $10 billion endowment has one woman. Columbia spokesman Robert Hornsby declined to comment.
“Guys have been lining up behind each other on the golf course for 20 years. University boards are a way to get in that same line”
Cheryl Holland got her spot on the investment committee of Bryn Mawr College, another Seven Sisters school, in 1998, not long after asking why there was only one woman on it, she says. By 2004 she was chairing the committee. Now the group has eight members, only two of whom are men. “It’s a sexy committee,” Holland says. “Everyone wants to be on it.”
Caruso-FitzGerald says Barnard’s investment committee faced a difficult decision regarding divestment from unpopular political causes, an issue that student activists on campus brought to administrators. The endowment’s final decision—selling investments in companies that deny climate science—resulted in the committee dropping its longtime outside manager.
The female-majority environment was critical in reaching a decision that made everyone comfortable, Caruso-FitzGerald says. “We’ve been able to tackle these difficult decisions, and we always get to consensus. There’s never this dominant voice that squashes everyone else’s viewpoint.”
There are plenty of jobs at university endowments—on the investment committees or in the funds’ offices. The committees are generally subsets of the university’s board of trustees, a combination of alumni and community members that provides strategic direction for the school’s fund. Committee responsibilities can include approving investment decisions and picking individual hedge funds and private equity firms in which to invest.
At some smaller funds, it may be a committee or two-person staff responsible for portfolio management. Larger funds have staff to manage the money, and the committee provides strategic direction.
It’s the investment office’s task to manage the endowment day to day. Unlike in many pockets of institutional investing, women are better represented in these offices than in other money-management roles. Among the 50 largest endowments, women head about a dozen, accounting for some $40 billion, according to data compiled by Bloomberg. Only one Ivy League endowment has a woman at the helm—Alice Ruth at Dartmouth.
“It’s impressed me that women are reaching the senior ranks at endowments,” says Debbie Duncan, a Wall Street veteran who’s the chair of the board of trustees at all-women Smith College and an investment committee member. This side of investing tends to have more women “than what you’d see in the mutual fund world or other institutional investors.”
That’s true despite women’s performance, which is as good or better than men’s when it comes to investing elsewhere in the financial world. Fixed-income mutual funds run by women have outperformed funds run by men since 2003, but only 14 U.S. debt funds were managed exclusively by women as of September 2017, compared with 47 in 2004, according to Morningstar Inc. The share of women running bond or equity assets has stalled for the last three years at about 1 in 10.
The pattern holds in C-suites, too. Companies where women make up at least 15 percent of senior management report 50 percent higher profitability, according to Credit Suisse Group reports. Companies that are led by a female chief executive officer have better price-to-book value and higher return on equity, Credit Suisse says. A 2017 Fidelity Investments study focusing on employee-sponsored retirement plans found that women tended to save more and performed better.
Wall Street, which is a feeder for endowment investment committees, hasn’t been a champion of promoting women to top spots. No woman has ever run a major bank. Less than one-quarter of the senior U.S. executives and managers at JPMorgan Chase & Co. and Citigroup Inc. are women. Ana Duarte-McCarthy, Citigroup’s former head of diversity, says it’s not a lack of talent but more a problem of getting women across the finish line.
University boards, especially investment committees, are often steppingstones to lucrative corporate board positions, says Betsy Berkhemer-Credaire, CEO of executive search company Berkhemer Clayton Inc. They’re essential to gaining board-related expertise and making connections, she says.
“Guys have been lining up behind each other on the golf course for 20 years,” Berkhemer-Credaire says. “University boards are a way to get in that same line.”
An essential role of university boards, of all stripes, is to encourage giving. Roxanne Wilson, who’s been a member of both the investment committee and the board of trustees at all-women Scripps College in Claremont, Calif., says having female majorities on both committees has helped Scripps raise money. And as times change, more and more of the donors are women.
“People, especially alumni, want to donate to something they believe in,” says Wilson, who got her start cold-calling alumni for money. “Back in my phone-a-thon days, women would tell me that they’d have to ask permission, or we’d get some lesser amount, while the husband’s institution got the big numbers. Women aren’t afraid to talk about money anymore.”
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