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Some schools view their locations as a liability in recruiting or retaining top investment staff. Not Malpass, who has turned Notre Dame’s cloistered campus in north-central Indiana into an asset, sequestered from financial centers yet accessible to them if the need arises. “People are happy to come, but we can filter out a lot of noise because we’re in South Bend,” notes deputy CIO Donovan, a graduate of Harvard Business School and the UCLA School of Law. “It’s 90 miles to Chicago if we really want to meet them. In a nice way, it makes it easier to do what we’re doing.” His conclusion: “We get to work in the world of Wall Street but live in South Bend.”

A visitor to the University of Notre Dame du Lac (its founding name, meaning Our Lady of the Lake) is struck at once by a campus steeped in Catholic tradition. Nearly all of the buildings, old and new, are designed in “collegiate Gothic” style, cloaked in yellow brick, with arched windows and doorways. The imposing Basilica of the Sacred Heart bears a 12-foot cross atop a spire and the largest collection of stained glass in the world. A giant mosaic affectionately nicknamed “Touchdown Jesus” (originally conceived as “Christ and the Saints of Learning”) adorns the side of the Hesburgh Library that faces the football stadium.

Despite his small-city base, Malpass has ventured further afield than many of his peers. His belief in emerging markets is one of the hallmarks of his investment style. “To a kid from Erie, Pennsylvania, travel was get in the station wagon and go to Pittsburgh for a Pirates game,” he jokes. Early jaunts to Japan and Hong Kong for Irving Trust whetted his appetite for overseas investments. “No question that resulted in me wanting a more global portfolio,” he says.

The endowment had a 10 percent allocation to international investments when he took over, and he made his first emerging-­markets investment in 1992 with a U.S.-based firm pursuing a pan–­emerging markets approach. The current 18 percent emerging-markets allocation is spread among all teams and asset classes. This number is nearly three times the size of the 6.6 percent average public equity emerging-­markets holdings of endowments and foundations with more than $1 billion in assets, according to Commonfund, which doesn’t track private equity investments in emerging markets.

In spite of his enthusiasm, Malpass has been characteristically disciplined in his commitments. He began visiting China in 1989 but didn’t make an investment there until 2003, through a private equity fund at a Hong Kong–based firm doing deals throughout Asia. The first public equity manager, hired in 2007 and based in Beijing, consists primarily of Chinese nationals. The CIO’s teams visit emerging markets four to five times a year and develop relationships with both public and private equity managers. Sub-Saharan Africa is a more recent focus, and current priorities include Ghana, Kenya, Nigeria, South Africa and Uganda. Notre Dame has approximately $100 million, or about 7 percent of the total emerging-markets portfolio, invested in Africa.

“It’s a lot of wear and tear,” deputy CIO Donovan says of the knowledge-building process in countries the team thinks will have increasing relevance. “We can’t invest in China, Africa and Brazil sitting in South Bend.”

Buhrman, who was hired in 2006 and oversees the public capital team, believes people are mistaken in thinking Notre Dame is bullish on emerging markets. “The way I frame it, it isn’t that we want to make more bets on emerging markets,” the 2001 grad says. “We feel answering the emerging-­markets question successfully will be a precursor of success for institutional investors.”

Notre Dame believes investing with the right people is more important than pinning down the right region or countries. Malpass’s team works to identify exceptional investors and establish partnerships rather than, say, taking a view on the Chinese stock market. Their on-site due diligence involves meeting with investors across asset classes, including successful local private investors who don’t manage outside capital. They also seek out government officials, economists, strategists, business leaders and anyone who can help them understand local economic and market dynamics. Malpass has taken trustees on group trips to Brazil, China and Singapore. Sandler O’Neill’s Dunne recalls a trip to São Paulo and Rio de Janeiro on which they met with Arminio Fraga, founding partner of hedge fund firm Gávea Investimentos, chairman of the board of securities, commodities and derivatives exchange BM&FBovespa, and a former Finance minister and president of Brazil’s central bank.

Malpass doesn’t believe that many institutional investors make that kind of commitment. Though he acknowledges investors can do fine investing in emerging-markets index funds, more involvement is needed to excel. Although emerging-markets investments are currently in a consolidation period, he says, “we want to be a leader. I can see us pushing 25 percent in emerging markets at some point in the next ten years.” Further out, when the endowment grows to between $10 billion and $15 billion, he says, he may establish an overseas office.

Today, of the endowment’s 27.5 percent allocation to 50 private equity firms, 34 percent goes to non-U.S. firms: 14 percent in Europe, 20 percent in Asia and the rest of the world. Half are in buyouts; the other half are split evenly between growth equity and venture capital. Over 25 years Notre Dame has made 353 discrete private fund investments.

Malpass launched the hedge fund portfolio in 1990 with a distressed-debt fund. By 1997 he had separated public and private investments, assigning staff to one or the other. In the early 2000s the investment team added long-short equity and global multistrategy funds. In the market downturn of 2002 and 2003, the CIO shifted 10 percent of the endowment into distressed hedge funds. At the time, he says, “they were all still in one bucket, where we viewed them in a similar way. That changed when the team started to bifurcate the hedge fund portfolio in 2003 by placing equity long-short into the public equity group and marketable alternatives in its own portfolio.”

Malpass is a highly visible figure at Notre Dame — unusually so for a CIO. He has made the campus central to his office’s recruitment and development, which begin with regular evening visits to residence halls where he teaches students about the investment office while they munch on pizza. When upperclassmen vie for internships or take Malpass’s investment courses, the bond deepens. “They are unbelievably integrated into the university,” Brennan says. “He’s a rock star on the Notre Dame campus.”

Malpass loves to teach and has instituted an annual exercise to memorialize investment lessons. Once a year he holds an off-site meeting with his staff. In preparation, each of the asset class teams prepares a list of things they’ve learned that year, both good and bad, from due-diligence mistakes to misjudging a money manager’s skills. The CIO says the assignment teaches that “you have to get your butt kicked a few times.”

A good part of Malpass’s time is spent counseling graduates, a few of whom become hiring candidates. In 2001, to help grads get to Wall Street, the CIO connected Notre Dame’s student-run Wall Street Club to the alumni-led Wall Street Leadership Committee. He even takes calls from grads on Wall Street seeking career advice. “He clearly derives psychic income from being such a vital part of Notre Dame,” Sequoia’s Moritz says.

“It’s implicit that in working for him your best interests will always be first,” says Buhrman, who after graduation took a job in equity research at Fidelity Investments, only to realize it was a mistake. He went on to earn a degree in Christian apologetics at the University of Oxford and an MBA at Harvard before answering Malpass’s call. “Scott said, ‘Come back here for the rest of your career,’” Buhrman says. “My interests in teaching, philosophy and theology all fit quite well with what happens in Notre Dame.” He adds, “The total cultivation of the self, more than most employers would define it, is critical to how he sees us as successful investors.”

But even Malpass has suffered through rough patches. Notre Dame scored big in 2000, achieving a 57.9 percent return, the highest ever for a U.S. university. The bursting of the dot-com bubble, however, provided a humbling lesson. Notre Dame saw its endowment slide from $3.5 billion in 2000 to $2.9 billion at the end of June 2002. At that point, the trustees decreed that any new building had to have 100 percent of its costs committed and 75 percent of that money in the bank.

Then came the financial crisis. In 2008 the then-$7 billion Notre Dame portfolio had small allocations of fixed income and U.S. equities, both 7.5 percent, with 12.5 percent in non-U.S. equities. Hedge funds made up 30 percent of the portfolio (split between marketable alternatives and long-short equity funds), private equity 22.5 percent and real assets 20 percent. By the end of the fiscal year, on June 30, 2009, the endowment had fallen by 20.8 percent, from $7 billion to $5.5 billion.

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