Alice Handy, a pioneer in investing for non-profits, to retire from Investure

Alice Handy, who founded Investure in 2003 after overseeing the University of Virginia's endowment for three decades, promoted Bruce Miller to succeed her as CEO on Jan. 1 as she prepares to retire at year-end.

She previously handed over the chief investment officer role to Hance West, who, like Mr. Miller, has been with the company since it started.

"They've never been more ready," Ms. Handy said in an interview about the team overseeing the 45-person company.

The succession is the final chapter of a storied career. At the University of Virginia in the 1980s, Ms. Handy was early among endowments to diversify into international equities and then to embrace alternative assets such as private equity and hedge funds in the 1990s. The university's endowment grew from $60 million when she was hired in 1974 to $2 billion when she left in 2003, making it one of the largest among U.S. public colleges.

Investure produced top performance for clients including Smith College and about a dozen other endowments and foundations. Her success inspired countless competitors as non-profits embraced the concept of outsourcing their investment offices. About $100 billion has been outsourced in higher education, more than double since 2010, according to data compiled by Bloomberg. Investure manages about $14 billion.

"She really created a whole industry at some level," said Verne Sedlacek, the former CEO of Commonfund, a money manager for non-profits.

At Investure, clients such as Smith reaped the benefits. The women's college in Northampton, Mass., saw its endowment catch up with rival Wellesley College by 2011, with about $1.5 billion in assets.

Investure has faced defections in recent years as clients demanded more discretion to screen out investments. In 2014, she cut ties with Rockefeller Brothers Fund after it decided to fight climate change and sought to divest from fossil fuels. Ms. Handy pools clients' money among asset classes, which she says creates scale and reduces fees. Divesting for one client means divesting for all of them.

"She said it just doesn't work. This is the business model," Stephen Heintz, the fund's president, recalled recently. "It was the right decision for her."

"Our model is all or nothing," Ms. Handy said in a Nov. 10 speech at UVA's Darden School of Business. "It's pretty audacious but that's how we started out. There was really nothing out there like it."

The defections raised concerns about whether Investure's model of pooling assets had become dated as competition intensified and firms offered to tailor portfolios, said Mr. Sedlacek. There are dozens of companies in the outsourced CIO business, from niche players to Wall Street behemoths such as Goldman Sachs Group (GS) and BlackRock (BLK).

"The question is, can it survive without her?," said Mr. Sedlacek.

At least four other clients in the past two years conducted reviews of their relationships with Investure. While none departed, it reflected the concern some had with Ms. Handy's plan to retire as well as Investure's weak performance in fiscal 2016, according to a person with knowledge of the matter who asked not to be identified because they weren't authorized to speak about it publicly.

Smith's fund lost 5.9% in fiscal 2016, more than twice the average of 2.5% for university endowments, according to data from Cambridge Associates. Investure client Trinity College in Hartford, Conn., lost 5.4%, blaming public equity, hedge fund and private equity investments without offering further insight in an annual report.

Ms. Handy declined to comment other than to say a number of funds hurt performance. Investure bounced back last year with average returns of about 12%, in line with industry averages.

"The business was so closely associated with me that it was natural that there was a shaking up," Ms. Handy said.

Dickinson College, which has a $380 million endowment, said in October that, following a review, it would remain with Investure because of "continued expectations for superior results."

Smith also said that same month that it would stay with the company. The school faced pressure from students to cut ties in order to divest from fossil fuels. Smith said it's working with Investure to identify investments that produce environmental and social benefits and that it will avoid direct holdings in coal.

Ms. Handy has launched a sustainable investing pool for her clients though her other funds still have exposure to fossil fuels. She has added five clients since 2014, including the University of Denver and the Skillman Foundation.