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board of trustees and nonmember investment professionals, typically meets quarterly. Yoder puts together the agenda and makes recommendations, but the committee makes all final decisions.

Yoder says that no two investment committees operate the same way. Typically the players include an in-house staff, a committee, and a consultant. Some endowments rely heavily on the consultant, while others have the consultant serve largely as an extension of staff.

Considering a Fund of Funds for Core Holdings

In finding a solution to their problem, Vassar is considering a fund of funds approach for its core holdings. The rationale is that if the committee has little confidence that they can select a good hedge fund and religiously rebalance their holdings, a fund of funds may be a better approach.

Would they consider a consultant? Yoder believes that many consultants are generalists who don't necessarily have any more experience than Vassar does. In recent years, Vassar has largely conducted its own searches and hasn't relied heavily on a consultant.

Views on the Industry

Yoder does not perceive hedge fund managers' fees as a problem. He feels transparency is getting better. It is critical to know the managers' strategies and main exposures, but an investor doesn't need to have detailed information on a daily basis.

CASE STUDY INTERVIEW: WESLEYAN UNIVERSITY

In the 1960s, Wesleyan University in Middletown, Connecticut, had one of the top endowments in its peer group regarding size on a per-student basis. In the late 1960s, Wesleyan sold one of its publications, My Weekly Reader, and received a huge inflow of cash. The endowment doubled. As a result, it spent too much, gifts from donors dried up, and a very conservative investment strategy was followed. Within years, the endowment was at the bottom of its peer group in terms of size on a per-student basis.

In 1998, the endowment rewrote the investment policy. The goal was to improve performance; the focus turned toward asset allocation. The endowment looked at the return/risk trade-off with regard to its