Drexel Looks To Build On Private Equity Holdings

Drexel University’s endowment may soon chart a more aggressive course into private equity. Joshua Kaplan, hired this January to be the school’s first-ever director of investments, said that backing a fund of funds may be the university’s next step.

Prior to Kaplan’s joining, Drexel’s endowment, now at roughly $620 million, had reached the point where it needed full-time attention, Kaplan said. The university’s board of trustees and CFO together steered investments before that, acting on suggestions from Cambridge Advisors Inc., which will continue to serve in a non-discretionary capacity. The school’s endowment posted a 21.4 percent return for fiscal year 2007, and Kaplan said he wants it to rank consistently as a top-quartile performer.

Drexel, a Philadelphia school known for its engineering curriculum, has a “modest” private equity allocation, and Kaplan said it’s too early to say what percentage of the endowment will eventually be devoted to to the asset class. Meantime, Kaplan said he has been inundated with pitches during his eight months on the job.

Drexel’s next step into buyouts and venture capital will likely be to invest with a fund-of-funds manager. “Until we build out the team and develop depth in specialty areas, we need to be sure we can handle [everything] from a due diligence perspective,” he said. Kaplan points to the portfolio strategy that Mark Yusko employed when he ran the UNC Management Co. as a model of innovative investing. Yusko, a vocal proponent of alternative investments, left UNC to found Morgan Creek Capital Management LLC.

Kaplan came to Drexel from Devon, Pa.-based SMART, an investment advisory company where he worked with wealthy families. He plans to hire more investment professionals for Drexel as the endowment grows.—J.P.