Michigan State Endowment to Be Run by Zecher, an Ex-Fund Manager

  • Other schools hire chief investment officers as funds grow
  • Philip Zecher co-ran currency hedge fund EQA Partners

Michigan State University hired Philip Zecher, a former hedge fund manager with a doctorate in nuclear physics, as its first chief investment officer to oversee the school’s $2.3 billion endowment.

The school joins other institutions such as the University of Nebraska in creating investment chief positions as their endowments have grown rather than outsource the responsibility to consultants. The value of Michigan State’s investments, which includes the endowment and some other funds, has climbed 800 percent since 2000, the university said.

“We had been managing this in a very traditional sense,” Zecher, 48, a Michigan State alumnus and insider, said Monday in a phone interview. “The size and complexity of the endowment got much bigger and the markets are more complicated.”

Assessed Risk

Zecher previously served on a university committee overseeing the endowment and since January has been a senior investments adviser to Michigan State President Lou Anna Simon. He was formerly a partner and chief risk officer at the Stamford, Connecticut-based currency hedge fund EQA Partners, which closed in 2012 after five years.

“Most of them have come to the conclusion that just makes much more sense to create your own investment management office with your own CIO,” Charles Skorina, an executive recruiter based in San Francisco, said Monday in a phone interview about university endowments. “It gives you the opportunity to capture an edge which you can’t do easily with a consulting firm.”

The Michigan State board of trustees approved Zecher’s appointment as chief investment officer on Dec. 18. The endowment had a staff of three people led by an investment director who, with the consulting firm Cambridge Associates, made money management recommendations to the committee overseeing the fund. Now, the CIO will have greater control over allocating assets while the role of the consultant will diminish as more employees are hired, Zecher said.

Michigan State’s endowment posted a return of 3.5 percent in the fiscal year ended June 30, trailing an average of 3.9 percent for a benchmark of its peers, according to a university report. The fund gained an annual 7.3 percent over the past 10 years, beating a 7.1 percent gain for its peers.

Hedge Funds

The fund has 29.3 percent of its portfolio in hedge funds, as well as 14 percent in other private investments, according to an annual report. The rest is in more traditional public equity and fixed income securities.

While asset allocation won’t change much initially, Zecher said having an investment chief with greater discretion will help the East Lansing-based school secure stakes in new private equity and hedge funds that now take less time to raise money.

The hedge fund Zecher helped run had closed because of poor returns, which he attributed to low central bank lending rates undermining gains from currency markets. Among the other founders was Andrew Alper, a former partner at Goldman Sachs Group Inc. who has been chairman of the board at the University of Chicago.

Before EQA Partners, Zecher helped start Investor Analytics LLC, which builds models for financial firms to measure risk.

“He’s one of the leading experts in the field” of risk management, said Damian Handzy, a co-founder of Investor Analytics who also has a doctorate in nuclear physics from Michigan State. “I think it’s great for the endowment.”