Lehigh University’s endowment fund is managed by the Investment Office, which oversees the investment activities of the university’s endowment, working capital, and life income assets. The Investment Office aims to maximize the long-term returns of Lehigh’s investment pools while maintaining an appropriate level of risk. As of 2022, Lehigh’s endowment stood at $1.69 billion, making it one of the top endowments among universities in the U.S. This article will examine the performance, asset allocation, investment strategies, and organizational structure of Lehigh University’s investment office.
Strong Long-Term Performance with Prudent Risk Management
Lehigh’s endowment has delivered strong investment returns over the long run while maintaining a prudent risk profile. According to the latest figures, the endowment’s 10-year annualized return was 10.1%, outperforming its policy benchmark by 100 basis points annually over the past decade. This demonstrates the investment office’s ability to generate consistent alpha over time through skilled active management. The endowment also had favorable risk-adjusted returns with a 10-year Sharpe ratio of 1.11, higher than broad market indices. The investment office aims to maximize returns without taking excessive risk, reflected in the endowment’s moderate volatility.
Diversified Asset Allocation Anchored by Equities and Alternatives
The endowment fund utilizes a diversified asset allocation strategy to balance long-term growth and risk management. As of 2022, the fund’s largest allocations were to public equities (31%) and alternative investments like private equity, venture capital, real assets, and hedge funds (54%). This large alternative allocation differentiates Lehigh from many peer institutions and is a key driver of the endowment’s outperformance. Fixed income, cash, and other defensive assets comprised 15% of the portfolio. Within equities, the endowment had dedicated allocations to domestic, international developed, and emerging markets. The asset allocation is optimized to provide equity-like returns with lower volatility.
Mix of Internal and External Asset Management
Lehigh combines internal and external management of the endowment’s assets. Around 60% of the portfolio is run by external investment managers who are selected for their expertise in specific asset classes and investment strategies. The remaining 40% is managed in-house by the investment office’s internal team. This internal team oversees portfolio construction, risk management, manager selection, and directly invests in assets like fixed income and public equities. The blended internal/external approach allows Lehigh to leverage specialized external expertise while retaining control over key strategic decisions.
Experienced Investment Team and Advisory Board
Lehigh’s Investment Office consists of an experienced team of professionals in investment management and research. The chief investment officer oversees the group and is supported by portfolio managers, analysts, and operations staff. An Investment Subcommittee of the university’s Board of Trustees works closely with the CIO to develop investment policy and provide strategic oversight. Lehigh also has an Investment Advisory Board composed of external investment experts who advise on topics like asset allocation, risk management, and manager selection.
In summary, Lehigh University’s $1.7 billion endowment fund has delivered robust long-term investment performance through a skilled active management approach and diversified asset allocation. The investment office combines internal and external management with oversight from an experienced team and advisory board.