(front page intro): In a first for a British university, Cambridge will today announce the appointment of City financier Nick Cavalla, chief investment officer of Man Global Strategies, to lead a new team to manage its £1.2 billion endowment fund. Observers say that by hiring a professional chief investment officer and establishing an in-house office to select external fund managers, Cambridge has stolen a march on Oxford which recently launched a similar campaign to overhaul its endowment funds.
For the first time in its 800-year history, Cambridge University is to appoint a City financier to lead a new team of in-house investment professionals to manage its endowment fund - a move not seen before by a British university. Today it will announce that Nick Cavalla, currently chief investment officer of Man Global Strategies, will take on the newly created role of chief investment officer of Cambridge's £1.2 billion fund in April.
The long-awaited appointment comes three years after Alison Richard, the vice-chancellor of the university, recruited in 2003 from Yale, launched an initiative to revolutionise the university's funding and put it on the same footing as its rivals in the US. Cambridge is richer than most UK universities. Its investments total £4.1 billion, although a two-thirds of this is held by 31 autonomous colleges managing their own money in their own way. Nonetheless, like many other universities, including Oxford, Cambridge is struggling with funding shortfalls.
Observers say that by recruiting a professional investment officer and establishing an in-house office to select external managers for the fund, Cambridge has stolen a march on Oxford University, which has launched a similar campaign to overhaul its endowment funds.
Ms Richard hopes that the investment office will in time rival its counterparts at MIT, Harvard and Yale. "We need to benchmark globally," she says. MIT has more than the £4.4 billion in its endowment fund, Harvard has a about $29.2 billion (£15 billion), while Yale's fund, under the aegis of its chief investment officer David Swenson who is now advising Cambridge, has risen to $18 billion.
Mr Cavalla, a 47-year-old Cambridge maths graduate with extensive experience of selecting managers and in the bond, a foreign-exchange and derivatives markets, is widely expected to re-allocate the funds' assets, shifting away from mainstream equities that make up 70 per cent of the fund, to alternatives such as hedge funds. To date the fund has been invested along conventional lines, with 15 per cent in bonds and cash, and 15 per cent in property. Mr Cavalla is leaving a City job managing about $15 billion in multi-manager funds at Man. Nonetheless, he says the new role is "exciting. This is a start-up with a wide canvas".
His recruitment ends a year-long search by the investment board which includes David Swensen, chief investment officer from Yale Endowment, Damon Buffini, managing partner of private equity group Permira, John Armitage, co-founder of Egerton Capital, one of the UK's leading hedge fund managers, and Michael Dobson, chief executive of fund managers Schroders. The board was set up in September 2004 as a first step towards beefing up the fund's long-term performance.
Ms Richard wants alumni to make American-style donations to the endowment and says establishing the endowment fund at the cutting edge of investment management is critical to achieving this goal. "At Yale [the endowment fund's performance] had a transforming effect on the fund-raising campaign. Donors wanted their gifts to be well managed." UK universities noticeably lag their US rivals, which have a long history of setting up investment offices and pioneering investment strategies. Over the past decade, Yale's fund has made annualised returns of more than 17 per cent by investing in alternative assets such as commodities and hedge funds. In contrast, Cambridge achieved annualised returns over the decade to July of nearer 8 per cent and contributes 6 per cent of the university's total revenues of £575 million, with a third coming from the government and another third coming from research funding.