Institutional Investor's Alpha Magazine - October 2007 - (Page 33)

hedge funds Dartmouth was using at the time. “I like David because he is tough,” says former investment committee member Russell Carson. “It doesn’t bother him to fire a manager.” Carson, co-founder of New York–based private equity ﬁrm Welsh, Carson, Anderson & Stowe, is a Dartmouth trustee and graduate of the class of 1965. The ability to think analytically and take action has served Russ — and Dartmouth — well. The endowment has grown by more than $1 billion since his arrival, to $3.8 billion, powered by an annualized investment return of 19.5 percent and $204 million in alumni gifts. Although Dartmouth’s endowment is big by most standards, it is just seventh in the eight-school Ivy League (only Brown University’s $2.7 billion endowment is smaller) and pales beside the endowments of Harvard University ($34.9 billion) and Yale University ($22.5 billion). That’s not lost on the trustees of Dartmouth, who, like many of the school’s alumni, are obsessed with beating their bigger rivals, be it at football or investing. Dartmouth has fought for years to step out of the giant shadows cast by Harvard and Yale. Even when the school’s stellar venture capital portfolio helped boost the annual endowment by 46 percent in 2000, the trustees felt self-doubt. “We didn’t think of ourselves as being in the big time because Harvard’s annual returns in dollars exceeded the size of the entire Dartmouth endowment that year,” says Peter Fahey, class of 1968. “We knew we were in a different league.” Fahey, a trustee emeritus and former Goldman, Sachs & Co. partner, is co-chair of the $1.3 billion Campaign for the Dartmouth Experience fundraising drive, to which he has committed $13 million of his own money. While Russ has been hard at work, the board of trustees has been having challenges of its own. Unlike most colleges, where alumni have little say over trustee appointments, Dartmouth gave its graduates the ability to nominate and vote on board members more than a century ago. Of the current 18 board members, the trustees and alumni each select eight, with the other two being college president James Wright and New Hampshire Governor John Lynch. In the past few years, alumni who have gotten 500 or more signatures have successfully petitioned the Association of Alumni for a place on the ballot along with the association’s nominees. Four petition candidates have won election. As their numbers have grown, the new petition trustees have begun to work toward changing the way Dartmouth is run. They are particularly critical of what they see as the current effort to transform the small college into a world-class research facility. This September the governance committee of the board of trustees, including Wright, recommended adding eight more trustee-elected positions — bringing the total to 26 — to ensure an undisturbed continuation of their agenda. The full board of 16 (minus Governor Lynch and Wright, who recused himself ), voted in this proposal. The new board would have 18 self-selected members and just eight elected by an open vote. The Association for Alumni, under the guidance of the petition candidates and other alumni seeking change, responded by ﬁling a lawsuit against the Dartmouth administration. Regardless of which side prevails, the swirl of negative press is affecting fundraising. Alumni donations account for 9 percent of the operating budget, and Fahey, who is overseeing the capital campaign, says many potentially large donors are waiting for the dust to clear before making commitments. Although Russ would like to stay out of the board controversy, he may not be able to avoid it. To keep the money rolling in, the college must convince alumni that it is investing wisely. Russ has traveled from Wall Street to Hawaii to address potential donors. “We didn’t think of ourselves as being in the big time; Harvard’s annual returns in dollars exceeded the entire Dartmouth endowment.” DAVID HENRY RUSS was — PETER FAHEY, TRUSTEE born in San Francisco, the eldest EMERITUS AND CLASS OF 1968 of three brothers. He grew up in San Rafael in Marin County, where his father owned a printing company. Instead of joining the Boy Scouts like other kids, Russ became a Sea Scout and learned to navigate a World War II PT boat around San Francisco Bay. His parents divorced when Russ was 15. Two years later he packed off to UC Berkeley, where he received a BA in genetics. He took the MCAT qualifying exam and paid his first visit to Hanover to see Dartmouth Medical School before a stint as a volunteer in an emergency room prompted a change of heart — and vocation. Russ tried his hand next at engineering, but that didn’t quite fit either. A summer job at Bank of California writing programs for hedging futures and devising simple price-yield tables led to his eureka moment. “That’s when I realized that maybe my path was managing portfolios,” says Russ. He went on to earn a master’s degree in administration, ﬁnance and accounting from the graduate school of management at UC Davis in 1986. That same year he got a job trading bonds for the Bay Area Rapid Transit District. In 1988, Russ jumped to Stanford University’s office of the treasurer. “What did I know about endowments? Nothing,” admits Russ. “But I managed bonds, which are harder than stocks — it’s pure math.” Russ worked as a portfolio manager at Stanford for six years, during which time the university established the Stanford Management Co. to run its then–$4 billion endowment. In 1994 Russ took a detour into pensions as director of investment management at Paciﬁc Telesis Group in San Francisco. Russ’s reputation for working with complex ﬁnancial instruments led to an invitation by Thomas Ricks, OCTOBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 33

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2007

Institutional Investor's Alpha Magazine - October 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Applied Knowledge The Good Guys: Autism Advocate Interview: Nerves of Steel Cover Story: Ivy League Education Alpha Awards: Top Service Providers: Trying Times Strategies: Passage to India Profile: The Oracle of Irvine Alpha Bytes: Futurama Research Center: Funds of Funds 50 Unhedged: Commentary: Crisis? What Crisis?

Institutional Investor's Alpha Magazine - October 2007

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