In the realm of university endowments, Ivy League institutions have long been seen as the gold standard. However, Baylor University has emerged as a new endowment performer to be reckoned with. With a significantly smaller endowment of $2 billion compared to the likes of Harvard’s $50.7 billion, Baylor has managed to generate an impressive 6.4% return for the fiscal year ending June 30. This outperformance is particularly notable when considering that Baylor’s annualized return of 10.9% over the past five years surpasses almost all Ivy League colleges, with only Brown University recording a higher return at 13.3%. Despite Brown’s larger endowment of $6.6 billion, Baylor’s investment strategy has proven to be a winning formula.
David Morehead, Chief Investment Officer at Baylor University, attributes the endowment’s success to the keen ability to take advantage of market dislocations. By closely monitoring market movements and allocating resources strategically, Baylor’s investment team has been able to capitalize on opportunities that arise due to market fluctuations. Morehead emphasizes the importance of being proactive in identifying these dislocations and adjusting the portfolio accordingly. This dynamic approach has enabled Baylor’s endowment to thrive, with its value more than doubling since Morehead took the reins in 2011.
One of the hallmarks of Baylor’s investment strategy is its focus on long-term value creation. Morehead and his team are unwavering in their commitment to a long-term investment horizon, disregarding short-term market fluctuations in favor of building a resilient and diversified portfolio. By actively managing liquidity and staying true to their investment principles, Baylor has been able to navigate through volatile market conditions and deliver consistent returns.
In a forward-looking approach, Baylor’s investment team is eyeing opportunities in emerging sectors such as helium, biotech, and small-cap companies. Morehead is particularly bullish on helium, citing its essential role in chip manufacturing and rocket launches. With supply shortages and increasing demand in these industries, Baylor is positioning itself to benefit from potential price surges in helium. Additionally, the team is keeping a close watch on developments in the technology sector, anticipating major tech companies to shift towards developing their own chips. This strategic alignment with future trends underscores Baylor’s commitment to staying ahead of the curve in the investment landscape.
As Baylor University’s endowment continues to make waves in the world of institutional investing, its success serves as a testament to the power of prudent risk management and strategic asset allocation. By embracing a proactive and diversified approach to investment, Baylor has established itself as a formidable player in the endowment arena. With a track record of outperforming the Ivy League giants and a forward-thinking investment outlook, Baylor’s endowment is poised for continued growth and success in the years to come.