In London’s Boat Race earlier this month, crews from Oxford and Cambridge universities renewed their annual rivalry to see which team could navigate a faster course through an often-choppy four-mile stretch of the River Thames. On that occasion, the underdog emerged triumphant, as Oxford notched an unexpected victory.
In the world of alternative investments too, Oxford is hoping to steal a march on its rival seat of learning.
Earlier this year, Cambridge announced that it had signed Yale CIO David Swensen to a new Investment Board that would advise the university’s Board on managing its endowment. The Investment Board, which met for the first time in March, also includes Permira luminary Damon Buffini among others. It is expected to steer Cambridge away from its predilection for UK stocks and towards alternative assets such as private equity.
But while Cambridge ponders its strategy, Oxford has rowed up to its bow with a new £100 million ($176 million) investment programme that’s poised to set sail next month. Oxford Investment Management (Oxim) has been launched by Karl Sternberg and Paul Berriman – both formerly senior executives at Deutsche Asset Management, and both Oxford graduates.
Oxim has garnered its current capital from assets owned by three Oxford colleges: Balliol, Christ Church and St Catherine’s. But it has no intention to stop there, and is actively seeking contributions from other colleges as well as charities. Speaking to the scale of the organisation’s ambition, Sternberg told PEO: “We don’t know how big it will get, but we’ll stop and take a look when we get to £1 billion to see what the effect of having that amount of capital will be on our capacity and performance.”
In the meantime, Oxim will concentrate on manager selection – in a big way. While other sophisticated investment programmes frequently put a strong emphasis on stellar managers within the context of set allocations to particular types of assets, Oxim is going further by placing manager selection ahead of asset selection. While 7.5 percent of total commitments is being put aside for private equity and another 7.5 percent for property, the remaining 85 percent will be to simply identify outperforming managers.
“We want to create a diversified portfolio by manager skill, and private equity is one part of that diversified strategy,” said Sternberg. “It doesn’t make sense to invest in private equity as an asset class because the range of returns is greater than in public equity. That’s why manager selection is very important.”
To assist it in its task, Oxim has hired Watson Wyatt to draw up a manager shortlist. Craig Baker and Alasdair MacDonald, head of European research and senior investment consultant respectively at the firm, are joining the Oxim investment committee. Also on the committee is Gavyn Davies, the former Goldman Sachs chief international economist and BBC chairman.
Sternberg says Oxim will announce its Board after the Easter holiday period. And, while Cambridge has teamed with Swensen, Buffini et al, Sternberg makes clear that Oxford too has a rabbit to pull out of the hat when the line-up is made official. “We will have a very significant private equity name on the Board of the company,” he says, apparently struggling to stifle his glee.
Clearly, it’s not only the Boat Race that makes the competitive juices of Britain’s leading halls of academia flow.