Internal investment management can earn universities the kind of brand equity not possible with an outsourced CIO firm, said Bruce MacDonald, CEO and CIO of the Virginia Commonwealth University Investment Company.
MacDonald said in a Jan. 29 interview that credit for the formation of the VCU investment management company goes to Michael Rao, the Richmond, Va.-based university’s president, who launched a study of best practices at similar large public research universities when he took office in 2009.
“He tried to pull from them as much as he could, and so the concept of an independent investment management company that serves only the university was one of the things that came out of UNC (University of North Carolina) and UVA (University of Virginia), two big research universities in close proximity,” MacDonald said at the Global Alts 2025 conference in Miami Beach last month.
“The core part of the vision was just like these universities, VCU has these disparate pools of capital,” MacDonald said. “If we could bring them together with one entity, that entity would then have the scale to access managers, and then access talent to bring in house.”
VCIMCO launched operations in early 2016, and MacDonald was part of the inaugural investment staff led by CEO and CIO Nancy Everett, a veteran whose past experience included CEO of GM Asset Management, the investment management arm of General Motors Co., Detroit, and CIO of the $117 billion Virginia Retirement System, Richmond, where she began her career in 1979.
MacDonald, who had served as VCIMCO’s deputy CIO since its inception, succeeded Everett as CIO in 2022 and as CEO in 2024 upon her retirement.
MacDonald said the formation of an internal investment management company has provided benefits for the university that would otherwise be absent if the university took a different path.
“You think of the alternative to an internal management company, you’d be hiring an OCIO,” said MacDonald, “and if you did that, the OCIO gets to build brand value and the partners there accrue that brand equity. If you do it internally, the university accrues that equity, and if we can do a good job with the scale that the consumer pools of nonprofit capital provide, then we will be building brand equity in a flywheel of success.”
MacDonald said an example of that brand equity is that when an internal staff generates good returns, it enhances donor engagement, which leads to more capital for the university, “and it just goes around and around.”
For fiscal year 2024, the university received $507 million in sponsored awards (funding from external entities vs. individuals), a 9% increase over the previous fiscal year and 86% over the amount received six years previously, and $213 million in donations, according to its annual report. The previous fiscal year, the university had collected $271 million in donations, the third straight year of record donations.
VCIMCO’s $1.7 billion long-term assets pool of endowment and other university assets returned a net 13.9% for the fiscal year ended June 30, short of its 14.2% benchmark return, but well above the median return of 9.8% among the 56 college and university endowments whose most recent fiscal-year returns have been tracked by Pensions & Investments as of Feb. 10.
Hitting stride
MacDonald said it took until 2020 for the VCIMCO investment staff to hit its stride, and what has helped in its buildout of its private assets portfolio is larger, more established organizations slowing down their private markets pacing plans in the last few years.
“Absolutely, we’ve gotten access in the last three years to managers that we had trouble accessing before,” said MacDonald, “so it’s definitely a profound dynamic and very exciting for us because we’re still in the process of building out the portfolio, and it’s great to have more people taking your call.”
MacDonald said overall what the company has been trying to do in its near-decade of existence is build a network.
“We have a particularly strong emphasis on early-stage venture, because … we believe the seed and pre-seed funds that are having the highest return potential are all at $200 million and below,” MacDonald said, "and so our check size is $5 million. We’re still a meaningful check for them, and then the impact that a great seed (or) pre-seed fund can have at a $5 million is also profound.”
As of June 30, the long-term assets pool’s actual allocation to private equity was 15.2%, and its target allocation to the asset class is 20%.
The rest of the portfolio’s actual allocation as of that date was 30.1% long equity (above its 27.5% target), 24.5% credit and absolute return (just below its 25% target), 14.3% long/short equity (12.5%), 8.3% real assets (10%), 7.7% cash (2.5%) and 0% fixed income (2.5%).
New risks
Moving forward, MacDonald said if there is one thing keeping him up at night, it’s the dramatic policy shifts of the new Trump Administration, one of which resulted in an emergency phone call.
“Yesterday (Jan. 28), I had an emergency call with the treasurer of the university because of the executive order of restricting federal funds,” said MacDonald. “It’s a really significant thing for a public university, a research university that has a significant amount of federal funds coming into research, and then we have the (VCU Health System) that’s affiliated with us that gets a lot of Medicaid dollars.”
MacDonald said policy shifts like that means he and his team of 9 must be cognizant of the new types of risks that didn’t exist before and be able to prepare the best they can.
“Hopefully, that doesn’t lead to asset allocation shifts in the long-term pool, but I think it would be naïve if you just dismiss these risks out of hand. You should think about what you might want to shift, and it could just be moderate shifts on the side toward having more liquidity, but that’s still potentially very important.”
