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LSU Endowment Goes to Cambridge Associates

After lagging its peers for years, the LSU Foundation has cut its internal CIO role and shifted investment management to Cambridge.

Louisiana State University has outsourced the investment management of its $454 million in endowed assets to Cambridge Associates, a big win for the advisory firm that culminated this year.

Cambridge now manages the entire endowment portfolio after the university began transitioning the investment management role to the firm about a year ago, according to LSU spokesperson Sara Whittaker.

In July 2016, the Baton Rouge-based foundation “began a partially outsourced chief investment officer partnership with Cambridge Associates,” according to its 2016 investment report. The investment committee and then chief investment officer, George Moss, were to “work closely” with the firm and “maintain high-level oversight of the endowed portfolios,” LSU’s foundation said in the report.

For Cambridge Associates, it’s a major win in a ferociously competitive and expanding outsourced CIO market. The CIO position no longer exists at the LSU Foundation, ceasing with Moss’s exit in December 2016, five months after Cambridge came aboard.

Moss, who subsequently spent three months at the University of Wisconsin Foundation as senior director of fixed income, deferred comment to LSU.

“George was a one-man shop here,” Whittaker said in an email. “We recruited for a replacement to assume his responsibilities, in a new role of director of investments; Alex McDermott was hired several months ago and is part of our CFO’s team, with a focus on non-endowed management.”

LSU had about $140 million of non-endowed assets, such as working capital and investment income, at the end of June, according to the spokesperson.

Endowments and foundations accounted for about half of Cambridge’s 1,115 clients at the end of 2016, a presentation from the advisory firm shows. Cambridge provides guidance on the vast majority of its clients’ assets, as opposed to managing their investments. The investment management business is more lucrative and most traditional consulting firms have followed Cambridge into the outsourced-CIO industry.

[II Deep Dive: Fear and Loathing in the Outsourced CIO Market]

A Cambridge spokesperson did not immediately provide comment on the LSU endowment, which has yet to release its fiscal 2017 results.

The university's general endowment fund underperformed its U.S. peer group in recent years, according to NACUBO-Commonfund data on endowments between $101 million and $500 million. LSU lost 4.66 percent in fiscal 2016, exceeding the average 2.4 percent loss posted by its peers. LSU’s annualized 1.96 percent return in the three years through June 30, 2016 lagged by nearly 300 basis points, while its 2.79 percent gain over five years trailed the average 5.1 percent return produced by its peers. 

(This story was updated to provide the latest amount of LSU's endowed and non-endowed assets.)

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