Few people have a greater impact on Vanderbilt than the person who manages the university’s $3.5 billion endowment. Last summer Philadelphia native Matthew Wright, then just 39, left his position as director of investments at Emory University to become vice chancellor for investments at Vanderbilt, succeeding Bill Spitz, who retired after 20 years at the university. Recently, Wright talked with Vanderbilt Magazine Editor GayNelle Doll about his work.
Everything changed shortly after I accepted Vanderbilt’s offer. While I was still at Emory, Gordon Gee decided to return to Ohio State University. The same day Chancellor Gee’s decision was announced, I received calls from several people who had been involved in recruiting me to Vanderbilt. They said, “We still want you to come. We think it’s a wonderful opportunity for Vanderbilt and for you.” Any anxiety we may have had related to Gordon’s announcement was quickly quelled by a tremendous outpouring of support.
In hindsight that experience served to confirm our decision. My wife and I had visited Nashville, walked around campus, and taken in some community events, and we knew this was a wonderful opportunity to raise our two daughters in a positive environment. I thought I owed it to myself, my family and to all those who aided me over the years to step up to the challenge of being Vanderbilt’s chief investment officer.
Then, just after I arrived at Vanderbilt, the market went into turmoil after having an incredible run. It’s this type of environment–when the market is moving up and down and there’s panic in the streets and in the papers–that presents opportunities for long-term investors.
Although it sounds perverse, I welcome the uncertainty. It gives us the opportunity to evaluate wonderful situations that we hope will pay off within the next three to five years.
We look for opportunities that are under-valued or unrecognized. We have the luxury of being able to step back and take a very long-term view.
We have 15 individuals–nine or 10 are investment professionals, and the others provide support. We outsource probably 90 to 95 percent of our investments, so our primary job is hiring experts. Instead of buying individual stocks and bonds, we hire firms that uncover opportunities within a specific area. Our job is to monitor them and understand what they’re doing. If we hire them, we need to have a relationship with them. People halfway around the world want to hear the same voices, see the same faces, and we want to follow up and have continuity.
So it’s important that we build a team that will have a long tenure at Vanderbilt. That means compensating competitively, providing the tools to make good decisions and, most important, fostering an environment that is creative and dynamic. We reinforce the notion that they are partners with the university whose decisions will impact the institution for generations to come.
It has made a tremendous difference. Back in the 1980s and 1990s, if you made an investment in Europe or Japan you were thought of as being on the frontier. Now there are not only more strategies–stock and bond strategies, hedge fund strategies, venture capital strategies, energy, technology, real estate–there’s also global expansion. That pushes the edge of the envelope. It forces us to be diligent in our processes and hire people with cultural fluency–not only language skills but openness to new ways of doing things and new dynamics.
We have to travel more, follow more strategies and spread out more. We are segmenting ourselves into developed markets, including the U.S., Europe, and developed markets in Asia; and emerging markets such as China and India and Russia and Brazil. We’re also looking at markets such as the Persian Gulf countries and sub-Saharan Africa.
Right now roughly 25 to 30 percent of our portfolio is invested overseas. We will probably get to the point where that’s about 50 percent, across the entire portfolio.
I would phrase that differently. There are things in this country we need to correct, but we’re in good shape. We’re the wealthiest nation in the world, and it’s going to take a long time for that to change. There is huge growth in markets overseas. Many of them have adopted models of democracy or migrated toward capital-driven markets, and there’s growth associated with that. We view foreign markets as a very wide pool of opportunities, and our migration to overseas markets is a function of that.
There is correlation between endowment size and the success and caliber of the institution, but it’s not always a direct correlation. With a larger endowment, you can seize the opportunity to recruit academic talent and students. You attract high-caliber people, and as they become successful out in the workforce, they’ll be in a stronger position to give back to their institutions and allow the endowment to grow.
If you look at an institution such as Harvard, one of the oldest universities in the country, it has an incredibly successful alumni base, and that alumni base gives back. It’s a circular arrangement that keeps the endowment growing.
Vanderbilt’s entire endowment portfolio has 2,300 individual endowments, and each has the same spending rate of 4.5 percent. That rate was established in the late 1990s and is periodically reevaluated.
We don’t have full discretion to say, “Let’s spend more.” We have to distinguish between unrestricted endowments and restricted endowments designated by the donor. Those dollars have been allocated to specific scholarships, professorships, chairs or programs. The individuals who made the gifts stated how they are to be used. They rightly expect stewardship and governance, and we abide by that.
We do have an academic venture capital fund that allows spending on specific program initiatives, which effectively increases our total spending to slightly above 4.5 percent, however.
At both Emory and Vanderbilt, I’ve invested in a Latin American trade finance fund. The fund makes short-term loans to provide working capital to small farmers who grow beans, fish meal, cattle, or a variety of other commodities for export. It has a very attractive return, and the risks are mitigated by a number of factors including different types of crops, different harvesting cycles, the size of the loan–all denominated in U.S. dollars–and the insurance behind the shipment. It’s diversified in a number of ways.
I’m just an index guy for a couple of reasons. I don’t have much time to go around picking stocks on my own. I make a few asset allocation decisions from time to time, but basically I have a long-term, low-cost strategy approach and I monitor my statements periodically just like everybody else.
© 2013 Vanderbilt University
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