Lafayette College endowment rebuilds PE portfolio

  • Assets under Management: $825 million
  • PE allocation: 10 pct
  • Why this is important: Rebuilding a PE portfolio can be a challenge with high valuations and fund volumes

In an environment of high valuations and fund volumes, endowments are finding it difficult to invest in good private equity managers.

“Endowments are LPs that GPs like to have, but many managers are not open to new LP relationships,” said Joseph Bohrer, chief investment officer at the Lafayette College endowment.

To ensure it gains access to desired funds, the Lafayette endowment is engaging with preferred GPs ahead of the fundraising cycle, Bohrer said.

The endowment decided not to focus on sectors or limit itself by the size of funds. Its only focus is high-quality managers, Bohrer said.

“We want them to know that we are long-term investors and committed to a good relationship,” he said.

Bohrer in 2014 joined the Lafayette endowment as its first CIO. Before this, the endowment was managed by the investment committee within the Board of Trustees. The investment committee members did not work full-time at the endowment.

“The committee did really well when the endowment was small, but as it got to the $1 billion neighborhood, it needed a full-time team,” Bohrer said.

The endowment’s PE returns have lagged the benchmarks because of some legacy investments, Bohrer said.

It is early days, but the strategy of building a fresh PE portfolio with good managers will pay off, he said.

The Lafayette endowment’s private equity portfolio accounts for almost 10 percent of the $825 million endowment, but it should ramp up to between 10 and 15 percent in the next few years, Bohrer said.

The ideal private-markets portfolio would be composed of 40 percent buyouts, 20 percent venture capital and the rest in private strategies like private credit, real estate, energy and any other opportunistic investment, he said.

Much like the new Harvard Management Co structure under Nirmal Narvekar, the Lafayette endowment team is also designed as generalist — but with a caveat. “In a smaller team, on a day-to-day basis people will specialize on an asset class on an ad-hoc basis,” Bohrer said.

The endowment decided not to use a fund-of-funds to build its PE portfolio. But for its VC allocation, Lafayette endowment has invested in a fund-of-funds for its “expertise and resources,” Bohrer said.

Some of its legacy private equity general partners include PineBridge Investments and Yorktown Partners, Form 990 showed.

Action Item: Read more on the Lafayette College endowment here