Banking on investor paying off for U

Stuart Mason investments have rebounded the University’s endowment.

Nina Petersen-Perlman

In fall 2002, the University’s endowment fund decreased to $475 million, down from $840 million in 2000, following the one-two punch of the dot-com collapse and the economic downturn following Sept. 11, 2001.

Today the funds are back at more than $800 million, a result many attribute to University Chief Investment Officer Stuart Mason, whom the University hired in 2002.

Mason shifted the University endowment’s portfolio from consisting almost entirely of public stocks and bonds to a bigger mix of alternative investments like timber and real estate.

Recent articles have painted the University’s investment whiz as a risk-taker, a characterization that irks him.

“I think the riskiest assets we can own are stocks,” Mason said. “Timber’s not risky.”

In fact, Mason said, his office’s number one goal was to reduce the volatility of the portfolio.

“What we had to do was clear to us three years ago: reduce public stocks,” Mason said. “The average person might ask, “What’s wrong with public stocks? That’s where we have our mutual funds, our pensions, our 401(k)s.’ “

He explained that because public stocks are liquid, and owners have the freedom to buy and sell them every day, they can be nerve-rackingly unstable.

One such stock is Google, on which the University spent $1 million when it started. It sold its shares last year and earned $50 million. Though shares have since soared, Mason said he doesn’t regret selling it, because of its instability.

“Google is a good example of a highly volatile stock, a really risky investment,” Mason said. “We don’t like stocks in the first place, but we had $50 million in one stock and we were running for the door as fast as we could.”

Mason said his biggest job when he started was to convert others to his strategy.

“We were way behind three years ago, and we’re ahead of the trend at the moment,” Mason said. “We’ve gone farther than many.”

University Regent Clyde Allen said he didn’t think there was any discomfort among other regents about the transition; they just wanted to be cautious.

The Board of Regents approves all investment plans.

“Any group of wise regents would want to ask questions about that,” Allen said. “What are the risks? What are the rewards?”

Allen said the regents continue to be cautious when Mason proposes changes. Mason plans to ask the regents this spring to invest more in nontraditional ventures, which now compose 35 percent of the portfolio.

“I think in most cases we’ve gone along with Stuart’s recommendations,” Allen said. “A couple times he had ideas and we said, “No, we don’t want to do that,’ which I think is a sign of a healthy process.”

Mike Volna, associate vice president and controller, said that even though the stock market has had good years, Mason has been integral in reversing the endowment’s fortunes.

“The diversification that Stuart has helped lead us into has done a lot,” Volna said. “He should get a sizeable portion of the credit in helping us craft this strategy.”

The strategy involves buying good, solid assets inexpensively and selling only when the University can get a premium price.

Those assets include about $75 million worth of office buildings, apartment buildings and condominiums nationwide; 25 timber properties and all the maple sugar manufacturing capabilities in Maine, Mason said.

“That’s the first line of protection for the University,” Mason said, “professionals who’ve been doing this for a long time and can tell sound investments from those that are higher-risk.”

Allen emphasized that though Mason certainly is an important element of the process, “he is by no means a one-man show.

“We have an individual who is very, very good at his work, but he’s at the center of a very thorough process,” Allen said.