2013 U.S. Investment Management Awards — Small Foundation

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Small Foundation


Limited life foundations have a special set of constraints. Like many other foundations, they have assets that are fixed from the start, and they operate without the benefit of ongoing gifts, points out Susan Racher, chief financial officer of the Wallace H. Coulter Foundation in Miami. But investing with an end point requires a different view of market cycle impact and manager risk. “Our asset allocation had to become more conservative, almost like a frozen pension plan,” explains Racher, 60, the foundation’s sole investment professional. Racher first met Wallace Coulter, co-founder of Coulter Corp., an innovator in hematology analysis, when she ran Bank of America Corp.’s large-corporate group in Florida, advising senior executives on corporate finance. The foundation, established in 1998, was funded from the 1997 sale of Coulter’s company to Beckman Instruments and dedicated to “translational” biomedical research — that is, finding ways to reduce the time it takes for medical advances to reach patients. Starting from scratch with $420 million in donor assets, Racher, who earned an MBA from the University of Chicago in 1977, wrote investment policy and hired asset managers. Soon she assembled a portfolio specializing in early-stage venture capital in underserved communities — Ann Arbor, Michigan; Cincinnati;Memphis, Tennessee — where there were promising university discoveries but not enough seed capital to bring them to end users. The 18 venture firms became partners of the foundation as an unusual synergy developed between the grants to universities and the portfolio investments. As the foundation’s end date of 2021 nears, Racher has reduced hedge fund investments to 5.6 percent of the portfolio, while private equity stands at 9.3 percent, and ratcheted up fixed income to 32.6 percent. Despite the constraints, the now-$300 million portfolio posted an 11.68 percent return in 2012, close to the median 12.17 percent for all endowments and foundations in the Wilshire Trust Universe Comparison Service. — Frances Denmark