How to Impact Aggieland Forever

This is a great question, especially given the uncertainty that the COVID-19 pandemic and associated shutdowns have introduced into the global marketplace this year. The answer is embedded in the purpose of an endowment: to provide a lasting and long-term impact. 

The purpose of providing a long-term impact enables our investment team to focus on processes and procedures specifically designed to look through short-term events. As difficult as it might be to believe, COVID-19 will be just a blip in the historical timeline compared to the duration of the endowment. This perspective allows us to invest in strategies and combinations of asset classes that are structured to withstand short-term corrections and provide long-term value by taking advantage of more enduring and sustainable market trends. On the other hand, short-term volatility can provide attractive entry points to longer-term strategies, and the team does try to take advantage of those situations as the market allows.

One of the keys to achieving long-term investment success for any organization is knowing who you are and what differentiates you from the competition. Our investment team has recently reflected upon what differentiates the Texas A&M Foundation from other asset owners, and we’ve identified our “Long Term Investment Pool” (LTIP) as one of these key differentiators.

The Foundation’s LTIP is a combination of approximately 8,400 endowment accounts that are pooled into a single portfolio. This setup creates a much more scaled platform for the investment team to engage the marketplace, thereby enabling access to a much more diverse set of opportunities than would otherwise be available to a typical individual investor. However, the LTIP is not at a size in which it is overly focused on scale transactions—meaning we don’t have to seek opportunities capable of handling large amounts of capital—so our team can be very nimble and take advantage of niche opportunities that are not available to larger pools of capital such as large state pension plans. 

Also, as previously mentioned, the ability to focus on the long term creates a huge advantage for the portfolio with regard to more sustainable decision-making processes and the ability to invest in longer-term strategies that can have greater and lasting performance impacts. 

Finally, and it goes without saying, the Foundation’s strong ties to the Texas A&M University ecosystem—compounded with the insights from and access to the Aggie Network—also serve as pillars of strength.

This is a very relevant question. Since I joined the Foundation as CIO in May, our team has undertaken an intense effort in a project we call the “Aggie Way,” which uses keystone investment principles we’ve developed to guide our team in sourcing and executing best investment practices. Those five principles are summarized below:

• The long-term view enables the power of compounded returns, and the long-term investment horizon is the basis for all investment activity.
• Good investment decisions are merit-based with candid and transparent debate between the relevant stakeholders.
• Relationships with principled external partners are the most effective means to access the best ideas in the market and to extend the team beyond College Station. We refer to this concept as “force multiplication.”
• A fully integrated, well-balanced portfolio requires a comprehensive approach to portfolio construction and risk management.
• Focus on sound and intentional investment opportunities that will mitigate portfolio risks and achieve value-added, long-term results.

The biggest investment challenge facing the endowment today is the low interest rate environment in which we find ourselves, and it doesn’t look like that will change anytime soon. Low interest rates make it much harder to generate the necessary returns to ensure the endowment meets its goal of preserving spending power over time. This is not a challenge unique to the Texas A&M Foundation. All asset owners are working diligently to find accretive investment opportunities, which has created a very competitive environment to gain access to those promising opportunities and ideas. In addition to the disciplined and intentional investment process and program previously described, we also place a premium on maintaining a high-quality team because we understand that it is people who drive results. And obviously, there is always competition for top talent.

Good governance is another key element to a successful investment program. Existing and prospective donors should rest easy knowing that the Foundation has a very high-quality board of trustees—dedicated and successful Aggie professionals—who are laser focused on supporting the enduring mission of Texas A&M. An integral part of the board’s role is to ensure alignment between the Foundation’s mission and the investment team by establishing the LTIP’s long-term strategy, more commonly known as the Strategic Asset Allocation (SAA). Through the process of setting the portfolio’s SAA, the board sets the standard for expected results of the portfolio, both in terms of expected returns and risk tolerance. This is a collaborative process led by the investment team and external partners, but ultimately it is the board’s decision. It is the most important decision from an investment perspective and is the basis for enabling consistent and dependable support to the university.