On May 31, in a stunning move, Lehigh University announced that Peter Gilbert would become the school's first chief investment officer. With high turnover at endowments and numerous U.S. colleges and universities seeking CIOs, securing one of the world's savviest and most innovative investors was a major coup.

Gilbert, who had headed up the $35 billion Pennsylvania State Employees' Retirement System for 14 years, is known for pushing the investment management envelope; at PennSERS he had $9 billion invested in hedge funds. His experience with alternative assets was a major attraction for the Lehigh board of trustees, which has ultimate oversight responsibility for the endowment and its current $90 million hedge fund portfolio.

Universities like Lehigh often entrust the management of their endowments to investment committees run by alumni volunteers. Such committees are tasked with myriad duties, including manager searches, portfolio construction and asset allocation decisions. In Lehigh's case,...