Making money across the world

Despite being an avid rodeo fan, University Chief Investment Officer Don Lindsey has proven he refuses to be thrown by the market. Over the past three years, GW’s $1.1 billion endowment has increased by 19.5 percent, giving the school the seventh highest rate of return among university endowments nationwide.

Lindsey, who started the University’s investment office four years ago, said his current strategy is to find areas of the market that have not yet been exploited.

“We’re very global in nature,” Lindsey said. “Maybe 10 years ago, our research trips would have been to go to New York, Boston, Chicago and the West Coast. Now, in addition to doing that, we’re going to Asia . we’re going to Latin America.”

Real assets – such as commodities, land and natural resources – is an area the University has not exhausted.

“A lot of people are saying, ‘Well, that play’s done, it’s tapped out.’ Well, it’s not,” he said.

GW’s operating costs are currently funded largely by tuition. Lindsey said he hopes to change this by permitting the University to operate solely off funds from the endowment. With help through fundraising, Lindsey said he feels that a minimum of $3.5 billion to $5 billion will be needed to make this shift, which will take a minimum of eight to 10 years.

An important factor in investing has always been the liquidity of the assets being acquired – meaning how easily they can be turned around for cash. Because GW can easily predict its expenditures every year, Lindsey and his team know exactly how much they can invest in the market.

“For us, liquidity is not a factor,” Lindsey said. “That means that we can be very long-term investors and take advantages of opportunities where capital is locked up for a long period of time.”

Geert Bekaert, a professor in the finance and economics division of the Columbia University business school, also believes investing in illiquid assets might have benefits.

“If you are willing to sit it out and have enough capital without a need to liquidate, you can earn premiums in the long term,” Bekaert said.

There is only one map in Lindsey’s office, and it is of Asia. Lindsey decided to invest heavily in Asia and Latin America because of the rapid growth of both personal income and the middle class in these regions and the subsequent demand for goods and services.

George Constantinides, a professor at the University of Chicago’s graduate school of business, said opportunities for investing in Asia are out there, but he also noted that a bubble might be swelling in China.

“There are good investment opportunities for the brave ones,” he said.

Another sector where Lindsey considers the potential for “huge” profit is agribusiness – specifically in the United States, Latin America and Australia.

“We’re spending an inordinate amount of time looking at it,” he said.

In contrast, Lindsey said the U.S. market provides far fewer opportunities and many risks, as seen by the subprime mortgage meltdown this past summer.

“There’s almost universal agreement that U.S. economic growth is going to slow substantially,” Lindsey said.

Lindsey said GW needs to make sure his six-person office – which he started from scratch in 2003 – does not get stretched too thin. He predicted that his office will grow in the next few years to better handle the increasing endowment.

Ultimately, Lindsey said he hopes that his efforts will prove to be successful, even if he sometimes makes a wrong decision. He recalled the words of Executive Vice President and Treasurer Lou Katz who told him, “You will make mistakes, and if you don’t make mistakes you’re not trying hard enough.”

“Success isn’t a function of just what your returns are in a given quarter or a given year,” Lindsey said. “It’s really a function of how much effort you put into the process, how well thought it is outand how willing you are to take chances.”

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