2024's Best Performing Endowment

Last week, we launched Allocator Insights, OWL’s brand-new newsletter. At Old Well Labs (OWL), we’re trusted by leading endowments, foundations, and other allocators to sift through billions of data points to help them find, monitor, and connect with fund managers globally.

Our platform delivers timely insights on the positions, performance, team changes, and business trends of more than 11,000 fund managers worldwide. OWL also gathers public data about thousands of allocators, providing insights into the positions and performance of thousands of endowments, foundations, pensions, and other LPs. Every week, we curate detailed highlights from OWL for our customers. Subscribe to Allocator Insights for bite-sized highlights and trends from our data.

If you’re an allocator and would like to see the OWL platform, please reach out and schedule a demo.

In this week’s edition of Allocator Insights, we’ll look at the portfolio for Michigan State (MSU), which has, so far, the best performance of any endowment that has reported for FY24 at 15.1%. The $4.4 billion endowment has annualized returns of 12% and 9.3% over the last 5 and 10 years. OWL users can see the full endowment performance tracker on our platform.

Michigan State’s endowment is run by Philip Zecher, an MSU alumni who received a PhD in nuclear physics from the university in 1996. Prior to becoming MSU’s first ever CIO in 2015, Zecher was a partner and Chief Risk Officer of the currency hedge fund EQA Partners for many years. Zecher runs MSU's investment office out of Stamford, CT.

Zecher’s tenure as CIO has seen Michigan State’s endowment double in value while distributing more than $1.1 billion over the last 9 years. Aside from strong returns, the endowment has also made headlines for leading unique investments back into the Michigan community. Last year, MSU invested $21 million for an 80% ownership stake in Detroit’s revitalized Fisher Tower, where the university plans to house a startup incubator. 
 
Michigan State is one of the many allocators whose detailed investments OWL users can track in our allocator database. A look at the portfolio to start FY24 helps understand the drivers behind MSU’s performance. As Zecher noted, “our strong performance this year came primarily from our large position in U.S. equities and the strong performance of our hedge fund portfolio... Like most, we saw private market investments significantly lagged their public market equivalent benchmarks.”  

Going into the year, MSU had ~38% of the portfolio in private assets, including real estate and real assets: 

Within its public portfolio, MSU has made a notable shift towards passive exposure in recent years. A Bloomberg article cited 10% of MSU’s endowment being in passive equity index investments, but their disclosures show significantly more in diversified, index-like exposure such as the GMO Quality Fund.
 
Based on the most recent MSU disclosures, when including these index-like exposures, we estimate that the university’s passive investments make up 34% of the endowment, up from just 9% in 2019. While the endowment also invests in several equity-oriented hedge funds, MSU’s entire 34% allocation to Global Equities is in passive and index-like exposure: 

Beyond the passive exposure, OWL users can see MSU’s full portfolio of 277 fund investments on our platform. One MSU manager whose investments made the news recently is Lime Rock, an energy PE firm in Houston that is backed by several other notable E&Fs like Duke, MIT, University of Chicago, and Carnegie Corp. 

In 2006, Lime Rock raised $750 million for its Fund IV and invested nearly $100 million of that into oil and gas producer CrownRock. The investment was made when US shale was a nascent industry and as the firm’s investment grew over the years, Lime Rock held onto it well past the typical lifespan for a fund of that type.
 
To give early investors the option of liquidity or rolling over their investment, Lime Rock raised a $1.9 billion continuation fund in 2018, Lime Rock IV AF. Michigan State participated in this round, with the endowment’s investment valued at $29 million as of 06/30/2023. OWL users can see the original Fund IV winding down in Lime Rock’s fund history as well as its capital raised over time in our Form D data. If you’d like a closer look at this data for more than 11,000 managers, reach out for a demo!

When Occidental Petroleum bought CrownRock this August for $12.4 billion, Lime Rock made roughly 79x the firm’s initial investment. 

Other News & Events

• Yale announced FY24 returns of 5.7%

• Princeton announced FY24 returns of 3.9%. 

• Michigan announced FY24 returns of 8.9%.

• Ted Seides weighed in on Yale’s new emerging manager program.

• Pathstone agreed to buy Hall Capital.

• Article by Adam Shapiro from East Rock on rules of portfolio construction.

• Hightower acquired a majority stake in NEPC.

• MacArthur Foundation is hiring a CIO.

• University of California is hiring a public equity investment officer.

About Old Well Labs

OWL is an intelligence platform built for allocators, by allocators. Leading endowments, foundations, and family offices use the system to find, monitor, and connect with thousands of fund managers globally. OWL's analytics engine has collected over one billion data points from 65 countries. We make it easy for allocators to find and track information about the managers they care about – not just positions but also performance analytics, people data, business information, and details about the manager investments of other allocators.

Disclaimers

Returns represent the return on invested capital of publicly disclosed long positions, as calculated by OWL. Actual returns may vary based on a number of factors, including (but not limited to) undisclosed positions, short exposure, non-equity holdings, cash holdings, and lagged disclosure of positions.

This newsletter and the material on the Old Well Labs platform are for informational purposes only and should not be considered investment advice or a recommendation of any particular security, manager, or strategy. Old Well Labs shall not be liable for any investment gain or loss that may occur from the use of this material. No part of this material may be reproduced in any form or used in any publication without express written permission from Old Well Labs.