Endowments increasingly are hiring managers of managers, partially the result of the service providers beefing up their marketing.
Using a manager of managers alleviates headaches for staffers at an endowment or foundation, who often do not have the time or expertise to hire a consultant and a stable of money managers, said managers and clients alike.
The new business from endowments and foundations is rolling in quickly:
* SEI Investments, Oaks, Pa., picked up $300 million in new business from endowment and foundation clients in the first quarter of 2002, said Carolyn McLaurin, senior vice president and managing director.
* Commonfund Asset Management, Wilton, Conn., has been given approximately $1.5 billion so far in 2002. The company was assigned $4 billion from endowments and foundations in fiscal year 2001, said John Griswold, senior vice president.
* Frank Russell Co., Tacoma, Wash., has picked up approximately $420 million of new business in 2002, said Dale Kindregan, relationship manager, endowments and foundations. In 2001, the company reported more than $1 billion in new manager-of-managers sales.
* Northern Trust Global Advisors, Chicago, reports it has pulled in $580 million in new endowment and foundation business for its manager-of-managers program since the beginning of 2002, said Jennifer Tretheway, senior vice president and director, manager-of-managers service.
Although endowments and foundations are not new to the manager-of-managers process, the specialized attention they are receiving from them is. Commonfund has marketed its manager-of-managers approach since 1971. That year, the company was started with a grant from the Ford Foundation, which was dissatisfied with the level of service it got from money managers at the time.
In more recent years, Northern Trust, Frank Russell and SEI all began concentrated efforts in attracting endowments and foundations.
Northern Trust, which acquired manager-of-managers RCB International in 1995, has an endowment and foundation staff of three.
At Frank Russell, Ms. Kindregan is the only person dedicated to endowments and foundations, but the rest of the sales and client service staff are educated in the unique needs of these funds.
Staffing pays off
SEI, which in 2001 created a staff of five sales and client service people dedicated to endowments and foundations, saw the payoff in new business. The company offers a package that includes investment management, record keeping, tax reporting, accounting and donor and financial statement production.
One of SEI's new clients is the $140 million Jewish Federation of Greater Philadelphia. "(The foundation) is not something that we can monitor effectively by an investment committee that meets every three months," said David Marshall, president of Federation Endowment Corp. The foundation recently hired SEI to replace its former lineup of managers.
The needs of endowments and foundations are different from those of corporate pension funds clients, said SEI's Ms. McLaurin. Those differences include reporting methods, grant making and the necessity of sending statements to donors.
The manager-of-managers approach also reduces or eliminates the need for consulting services, some managers said.
"They can get good advice from a manager ... you can be saving all kinds of resources...," Commonfund's Mr. Griswold said.
If current trends continue, more assets will be up for grabs. According to a report from the Council on Foundations, Washington, foundations received approximately $27.6 billion in gifts in 2000, three times the amount they received in 1991. And the report estimated that figure will grow to $29.2 billion for 2001.
Total foundation assets increased to $408.7 billion in 2000, and 6,381 foundations were created in 2000 alone, it said.