An institution’s mission and strategic goals should be reflected in its endowment investment philosophy, and in turn its endowment philosophy should be reflected in asset investment decisions, said Hollins University (VA) President Nancy Oliver Gray during a Presidents Institute session on strategic asset allocation for endowments.

Gray urged presidents to become as knowledgeable as possible on financial investment issues and to play an active role on the trustees’ investment committee. Familiarity with investment principles and strategies also aids presidents in discussions with potential donors as well as trustees, Gray reported. She shared Hollins’ “statement of management and investment policies for the endowment fund” as an example of how to connect a college’s mission with investment guidelines but warned attendees not to consider it a blueprint for other institutions. Gray explained that the extent of the operating budget’s dependence on investment income, institutional strategic goals, willingness and ability to tolerate investment risk, and other factors vary across institutions. The role for presidents, therefore, is to develop an investment philosophy and strategy that matches the specific institutional circumstances.

Douglas Fore, director of portfolio analysis at TIAA-CREF Asset Management, provided a crash course on general investment principles. He highlighted the need for each college to define its willingness and ability to bear investment risks, leading to an institution-specific guideline for maximizing risk-adjusted returns. Fore also reflected on the latest market developments and highlighted the implications of an infinite life-time expectancy for endowments, for example, compared with retirement investments. During the lively question and answer portion of the session, Gray stressed that smaller colleges in particular would be well advised to hire external endowment managers but that the expert fund managers should be guided by institution-specific guidelines on investment goals and principles.