GW cuts investment positions, turns to outside firm to manage endowment

Updated March 10, 2014 at 10:05 a.m.

GW will hire an outside firm to oversee its $1.4 billion endowment for the first time in more than a decade, cutting the role of its chief investment officer and six other positions.

Just two investment officials will remain out of the nine-person office after GW moves to outsource the management of its endowment – the lifeblood of the University’s finances – by July, University spokeswoman Candace Smith confirmed Friday.

Chief Investment Officer Don Lindsey. Hatchet File Photo
Chief Investment Officer Don Lindsey. Hatchet File Photo

Chief Investment Officer Donald Lindsey, who has led the investment office since it was created 11 years ago, was the seventh highest paid administrator at the University in 2012, according to GW’s most recent tax filings. He earned $615,660 in total compensation that year.

“The university decided that the best option for managing the investment of its growing endowment is to take advantage of the broad expertise and experience that an investment firm can offer,” Smith said in a statement. “The decision to outsource this function is not a reflection on the investment office or its personnel.”

She said the move was similar to GW’s recent decisions to use outside firms for services such as internal auditing, food service, mail service and facilities upkeep.

Lindsey, who has 26 years of experience managing endowments, will oversee the transition before leaving GW later this year, Smith said.

“I am very appreciative and thankful for the leadership and mentoring of former Chairman of The Board Russ Ramsey and Executive Vice President and Treasurer Lou Katz. I also want to thank the brilliant and talented staff of the GW Investment Office,” Lindsey said. “GW will always hold a special place in my heart.”

Nonprofit organizations are increasingly bringing in outside investment firms to reduce pressure on their own payroll. Other universities that have decided to outsource their portfolios in recent years include Middlebury College, Syracuse University, the Culinary Institute of America, DePauw University and Marshall University.

The University of Colorado Foundation, which outsourced to a firm called Perella Weinberg Partners in 2012, paid $2.1 million in fees to outsource its $771 million endowment.

The investment office has faced scrutiny over the last year, after its former director of operations and risk alleged that she was fired for trying to expose unethical financial practices that she said she observed in the office, which included inflating its endowment growth.

Carol Ann Lindsey, with no relation to the chief investment officer, said she was fired about two weeks after contacting an outside accountability group about the errors, and called the termination “willful, malicious and oppressive.” GW has declined to comment if the lawsuit had impacted its decision.

The University’s total endowment expanded by 5 percent last fiscal year, or about $70 million, after GW used its annual payout from the endowment for costs like salaries and research programs. Endowment assets grew by about 9 percent overall, underperforming with its private markets portfolio, according to last year’s endowment report.

The gains were considerably lower than many of GW’s competitor schools – such as Southern Methodist, Northwestern, Duke and Georgetown universities – which all surged by 11 percent or more.

The bulk of GW’s returns came from its large investment in real estate, which the investment office does not manage.

Two investment officials will remain in the office to oversee operations, manage GW’s relationship with the firm, and audit the endowment. Those officials will report to Ann McCorvey, the deputy executive vice president and treasurer, Smith said.

The University has not yet picked a firm, but Smith said GW “will solicit requests for proposals and award the contract to a firm that represents the best prospects for the university.”

The Hatchet has disabled comments on our website. Learn more.