SEI/AGB roundtable recap

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5 MIN READ

About the event

Fueled by our joint study with AGB, our recent three roundtable events were well attended and yielded practical insights for financial professionals within higher education. Discussions covered a range of topics, including foundation operations, inflation and return expectations, processes for unspent distributions, asset allocation changes, and governance findings. Sessions were segmented by size to ensure relevant insights and idea sharing. Processes around unspent distributions were especially interesting, varying greatly among respondents. Of additional interest, DEI language has been added to the Investment Policy in 16-30% of the foundations, depending on size cohort. Other key findings by session are listed below.

Results by session

Key takeaways: Endowments under $100m

Operating budget and spending: 98% have an annual operating budget of $5M or less (compared to only 40% from the group with endowments $100-500M). The largest percent (28% on average) of operating budget comes from institutional support/shared service agreement.
Organization structure and governance: 62% report into the institution or system vs. the foundation board (only 18%). 78% oversee special events (vs. 56% of $100-500M) and 65% oversee alumni relations (vs. 47% of $100-500M). Only 65% responded that they charge an endowment management/administrative fee, of which 43% were <50 basis points. OCIO was the investment partner used by the majority of the institutions in this size cohort.
Asset allocation and investments: Only 21% are making changes to their asset allocation, of which two-thirds are increasing the allocation to alternatives --private equity, real estate and hedge funds especially. ESG/SRI strategies are used by 21% of the 57 respondents in this size cohort, an additional 4% are adding this fiscal year. The majority noted the criteria in their Investment Policy Statement (IPS). DEI language has been or will be integrated in 18% of investment policies. Regarding carryover and accumulations of distributions, there were 12 different approaches, from returning annually to the endowment to moving excess into an investment reserves account. Additional details are available in the presentation.

Key takeaways: Endowments $100m - $500m

Operating budget and spending: 70% are responsible for “real estate acquisition, development and / or management” (compared to only 52% from the group with endowments $500M or greater). On average, 74% of the annual operating budget comes from the endowment management fee and institutional support/shared service agreement. Regarding excess accumulations and carryovers, of 26 institutions that answered the question, there were 14 different approaches. Most often cited were reinvesting in the endowment, working with the University to monitor spend, compliance testing throughout the year, and moving excess into a reserve account. Additional details are available in the presentation.
Organization structure and governance: 41% have 31 or more full time equivalents. 63% use an OCIO as an investment partner. Use of an OCIO has almost doubled in 10 years, from 32% in 2012 to 63% currently. Endowment Management/Administrative fees are charged by 91% of institutions in this size cohort. The largest response, 32%, charged >150 basis points, 24% charged 101-125 basis points, and another 24% charged 76-100 basis points.
Asset allocation and investments: Asset allocation is being changed by 38% of the respondents, of which 44% are increasing the weight to Alternatives. Most often utilized is Private Equity and Venture Capital, followed by Hedge Funds which were equally implemented through a fund of funds vehicle or direct. Private real estate and energy were the next most often used. ESG/SRI strategies were used by 24%, an additional 5% adding this fiscal year. Generally, less than 10% of the portfolio was effected. Of note, 16% have integrated DEI language into their IPS.

Key takeaways: Endowments $500m or greater

Operating budget and spending: Nearly half 48% have an annual operating budget of $11M or more. Only 31% are responsible for alumni relations. The largest percent (56% on average) of operating budget comes from the endowment management fee. Regarding Excess Accumulations and carryovers, of 28 institutions that answered the question, there were 24 different approaches. Some examples were requiring spending plans, quarterly reviews with Foundation and University staff, quarterly review by the Foundation Board, and redepositing to the endowment. Additional details are available in the presentation.
Organization structure and governance: Endowment management and administrative fees are charged by 100% of institutions in this size cohort. The largest segment, 28%, charged 126-150 basis points, 24% charged 101-125 basis points, and another 24% charged 76-100 basis points. Use of an OCIO was 40%, as this size segment of higher education has been moving more recently into this investment partner model. More than half (52%) have 60 or more full time equivalents on their staff.
Asset allocation and investments: Asset allocation is being changed by 62% of the respondents, of which 67% are increasing the weight to Alternatives. Most often utilized is Private Equity and Venture Capital, followed by Direct Hedge Funds. Private real estate, distressed debt and energy were the next most often used. ESG/SRI strategies were used by 32%, the highest usage rate of the entire survey. Of note, 23% have integrated DEI language into their IPS, and another 7% plan to do so.

For ideas on ways to apply these new themes to your organization, we can help.

How to apply current themes

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Information provided by SEI Investments Management Corporation, a registered investment adviser and wholly owned subsidiary of SEI investments Company. For Institutional Investors Only. Not for Public Distribution.
AGB is not affiliated with SEI or its subsidiaries. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results.
Session attendees: under $100m (9), $100m-$500m (7), over $500m (7).