This content is from: Corner Office
How a Decision in 2019 Fueled Drexel’s Top Returns
CIO Catherine Ulozas says now might be a good time to start slowly deploying the cash the university’s portfolio is holding.
Three years ago, Catherine Ulozas and the board thought it was time to start decreasing the risk in Drexel University’s endowment. Now that work, which included holding cash and real assets, has paid off.
The chief investment officer is proud of the endowment’s return of 1.68 percent for the one-year period ending June 30, a time that included some of the toughest markets in more than a decade.
The performance put the $961 million organization in the top 2 percent of the Wilshire survey of endowments and foundations, said Ulozas. According to the Wilshire Trust Universe Comparison Service from August 9, large foundations and endowments lost 1.15 percent for the one-year period.
Ulozas said the university endowment’s positive annual returns grew out of decisions made a number of years ago. “We had a large cash position and a movement into real assets,” Ulozas said. “That served us well through the volatility. One year doesn’t really tell the story. Our story is that prior to the pandemic, the investment committee at Drexel [had] moved to a risk-off strategy, as it saw challenges in the future.”
Drexel started moving toward decreasing its portfolio risk as early as 2019. Currently, 10 percent of the university’s portfolio is held in cash, but Ulozas said that this could change, noting that now might be a good time to start slowly deploying capital into private assets in particular. Infrastructure, industrial assets, and core real estate look especially attractive to Drexel in the current inflationary environment.
“I'm not out to hedge inflation, but to capture it,” Ulozas said. “We're definitely looking at those types of funds where the assets can reprice to inflation and are stickier.”
Ulozas’s background is in bond trading — she joined Drexel in 2010 as its CIO after working as a portfolio manager for both public and private institutions. She credits her background with informing her current investment process. Like many investors her biggest concern in the market these days is what the Federal Reserve will do next.
“We’ve been light in fixed income,” Ulozas said. “We can start to assess opportunities in this space as rates rise.”
Structured products, including real estate debt funds, could be interesting portfolio additions, she added.
But Ulozas tries to remain focused on Drexel’s broader mission. “We were mission-driven the whole time. Some years it’s going to be good, some years you’ll maybe take a bit of a hit relative to the performance of others because you’re planning for the future of Drexel, not the future of the markets.”
The endowment takes a community-minded approach to some of its investments. These include Drexel’s 2019 partnership with Tower Health to buy Philadelphia-based St. Christopher’s Hospital for $50 million, pulling the organization out of bankruptcy and allowing Drexel students to continue their residency programs with the medical center.
In June, Children’s Hospital of Philadelphia, Thomas Jefferson University and Einstein Healthcare Network (now part of Jefferson Health), Temple Health, Philadelphia College of Osteopathic Medicine, and private donors said they would provide more than $50 million in financial support to Children’s Hospital.
Meanwhile, one of the portfolio’s top-performing funds also benefits Drexel students. “I always love to point out that our Dragon Fund, which is managed by an actual class at Drexel, is the best performing manager at the endowment,” Ulozas said. “We're extremely proud of this. One of the best things about my job is interacting with the students.”