Getting Ahead of the Financial Crisis

What did it take to move investments from equities to cash weeks before the Lehman Brothers collapse? Having your ear to the ground, according to Sandra Robertson, the first professional investment officer of Oxford University's endowment fund in the institution’s 800-year history.

“Sometimes you can feel whether people are really nervous,” Robertson told students, alumni, and executives at the European Wealth Management Roundtable on September 16 at Chicago Booth’s London campus. Under Robertson’s direction, Oxford had 25 percent invested in cash when the Wall Street giant collapsed on September 15, 2008, triggering a worldwide slump in stock markets. “There was something in the market that I have never experienced before. We were selling a lot of equities and we were nervous about allocations, so we sold at the end of August and the beginning of September. So we had the cash in the bank when Lehman Brothers went under. Sitting on 25 percent cash gave me a little more breathing room than I would otherwise have had.”

Robertson said she decided in spring 2009 to use cash to increase the fund’s equity portfolio. “Things had stopped getting really bad,” she said. “We did look at the valuations and at the markets in March and April and we thought that there was a lot of cash on the sidelines and the world would not stop growing.

“We took a view that over a five-year period it was going to be a good time to buy equities. We are overweight equities and that has worked quite well for us in the last three months.”

Asked whether she thought the markets could carry on rising after the steep gains since April, Robertson said: “Now I don't have such a high conviction to be honest and we are taking a little bit off the table here and there.”

Robertson was appointed in 2007 as chief investment officer and CEO of Oxford University Endowment Management (OUEM), a wholly-owned subsidiary of the university that was set up as part of a restructuring of its asset management.

Previously the investment committee was dominated by academics with no dedicated professional advisers or explicit investment objectives. Meetings were held quarterly and only during the academic year. “If a crisis happened over the summer you were out of luck,” she said.

In 2009 OUEM launched the Oxford Endowment Fund with a new investment object and investment policy and an investment committee made up of financial professionals.

While the previous model was heavily weighted towards equities and UK stocks in particular, the portfolio now is much more diversified. The neutral weightings include 20 percent in private equity, 16 percent on real assets such as land, and 15 percent on “non-directional” assets to hedge against market downturns.

She described her allocation policy as “holistic”, saying it was important to understand how investing in one sector affected the overall portfolio. “We try to make sure we understand all the themes of the portfolio,” she said. “It is a bit like gardening. You’re taking things out, putting things back in, and trying to see how the whole thing works.”

Among attendees was Michael Borkan, ’82, who appreciated Robertson’s “candor in positioning what Oxford is trying to do relative to the aura around the efforts and direction of such institutions as Yale and Harvard.” Additionally, said Borkan, who is also an Oxford alumnus, “Having practitioners who have other than a U.S. focus is critical if Chicago Booth is to train people to think, act, and work in a global marketplace, regardless of whether it is for toothpaste or investments.”

                                                                                                                — Phil Thornton