Fund manager Nick Cavalla reveals how Cambridge University invests its money

Gwen Jing - Deputy News Editor 22 November 2012

Nick Cavalla, the man in charge of managing the University of Cambridge’s endowment funds, has said he is confident about the investment of Cambridge’s funds but is maintaining a cautious approach to investing.

As the richest university in the UK, Cambridge has total assets worth £4 billion, £1.7 billion of which are managed under Mr Cavalla in the University of Cambridge Endowment fund.

Of this fund, around 60 per cent is invested in listed global stocks including Unilever, Diageo and Procter & Gamble. Mr Cavalla expresses that he is interested in fund managers who “do different things”.

The endowments support around 5-6 per cent of Cambridge’s budget each year, and Mr Cavalla cautioned that “just a bit more than that would risk imprudence.”

With rising university tuition costs, university officials are paying increasing attention to revenue from the endowment fund and are looking for alternative ways of funding higher education. To this end, last month the University announced its first issue of £350 million worth of bonds.

But Mr Cavalla says he feels no pressure to change his investment approach. “I don’t feel under any pressure. To be honest with you, there’s little I can do to increase the size of the endowment in the short run,” he says frankly. “We’ve had four and a quarter years here under my watch. And the performance has generally been pretty good.”

A maths graduate from King’s College, Mr Cavalla has since his appointment in 2007 boosted the university’s endowment fund to £1.7 billion from £900m when it was managed by F&C Investments.

In addition to this central fund, Cambridge’s 31 colleges manage their own endowments separately. This is troublesome to directors at some colleges, who find it difficult to find ways to invest relatively insignificant amounts of around £10m to £25m.

In a move to resolve this problem, Mr Cavalla reorganised the central endowment fund in 2010 so that colleges could invest in it. Two colleges now invest purely in the fund and four other colleges are partially invested.

“The fund was always unitised, but now it has got a proper prospectus which means that these colleges can invest in it if they want to,” he explains. “As far as the colleges are concerned, I think they’re happy with what they’ve got as performance has been good.”

From an international perspective, however, the University comments that its assets are still “dwarfed by US universities.” Endowments in US universities are considerably larger, with Harvard, Yale, Princeton and the University of Texas each controlling funds of over $17 billion.

Mr Cavella claims that the issue for Cambridge is an overreliance on public shares: “The piece we’re missing materially compared with US universities is that we’re overweight in public equities and we’re underweight in private equity.”

Keeping in line with his prudent approach, he adds: “We’ll migrate a little bit more into private equity over time, but carefully.”

Gwen Jing – Deputy News Editor