August 11, 2008

Contact:   Bill Giduz

(l-r) Nate Mease and Ray Jacobson

The two men hired recently to direct investment of Davidson College's $506 million endowment thoroughly understand their field as both art and science. Raymond A. Jacobson, chief investment officer, received a master's of science degree in atmospheric physics and astrophysics before changing careers and earning his MBA from Duke University. R. Nathan Mease, investment analyst, studied chemistry as an undergraduate before earning his master's degree in investment management at Boston University.

The analytical skills they gained from scientific study prepare them for problem solving, for approaching choices objectively, and for making sense of vast amounts of information.

The sterling records of success they compiled in positions before coming to Davidson indicate they are also adept at the art of maintaining contacts in an industry where personal relationships are key to finding the best opportunities for the highest investment returns. "It's a people business," said Jacobson. "You spend a lot of time talking with managers, peers, alumni, and others to sift through the unbelievable number of investment options out there."

Davidson seeks to earn at least five percent annually over inflation from its endowment to provide a sustainable and increasing level of support for the college's annual operating budget. In the current fiscal year, the college is projecting that five percent return will be about $20 million, which will supply about 22 percent of the income needed to meet the college's $92 million expense budget. An additional half percent of endowment return is captured annually to fund deferred maintenance, and another half percent services debt.

Through the leadership of the late Burton Hudson, Davidson built an outstanding record of 11.1% average annual endowment return for the past decade through June 30, 2007, which ranked in the top quartile of peer institutions. In today's recession economy, with the Standard & Poors index down more than 13% this past fiscal year, Jacobson and Mease hope to keep Davidson's returns at least in positive territory. The key, said Jacobson, is diversification. While stocks have tumbled, he noted that several sectors have yielded positive returns, including energy, commodities, fixed income, cash, private equity and hedge funds.

Mease explained that the college does not invest directly in individual stocks, bonds, or any market vehicle. Instead, he and Jacobson identify and recommend placement of investment dollars with fund managers, whom they choose after detailed due diligence and based upon fit within the overall investment policy. The college currently has relationships with about forty of these managers. Given the long term focus of investment policy, big swings in asset allocation do not occur frequently.  "We mainly just trim and rebalance at the margins," Jacobson said.

However, they are always on the lookout for new managers and opportunities.

The college's current allocation of funds is 35 percent in global equities, 14 percent in private equity and venture capital, 21 percent in hedge funds, 12 percent in fixed income vehicles and cash, and 18 percent in real assets such as commodities, real estate, and energy.

Jacobson must sort through reams of offers to manage Davidson's endowment funds that cross his desk daily.

Jacobson said friends and colleagues sometimes ask him for investment advice, and wonder how institutional endowments can increase while their personal investments sink. He explained, "There are many opportunities available to large-scale institutional investors that individuals can't purchase. The best thing for most individuals is to buy index funds representing different parts of the broad market."

Jacobson and Mease report to Karen Goldstein, vice president for Finance and Administration. Those three make recommendations for investment allocation to the college's Board of Trustees Investment Committee, which alone is empowered to invest college funds. The committee is chaired by Arnold H. Snider  '66, and is assisted by an informal advisory group of four alumni who are in the investment business.

Jacobson comes to Davidson after four years as vice president of investments for the Golden LEAF Foundation in Rocky Mount, N.C. That public foundation, established in 1999, receives half of the state's annual proceeds from the master settlement agreement with cigarette manufacturers, and distributes grants to promote economic development in rural and distressed communities across the state. For the three prior years he was an investment manager for the Duke University investment office.

Goldstein said she was impressed by Jacobson's initiatives at the Golden LEAF Foundation. "He turned their very traditional investment structure into one like ours with a great deal more diversity and complexity," she said. "He's smart, and eager to meet investment managers, which is the only way you can learn what is necessary to make intelligent choices among the many, many investment opportunities out there."

Mease is the college's first investment analyst. A North Carolina native and 1999 graduate in chemistry of UNC, he worked for five years in the Triangle area with a company that supplied materials for life science research, and another that monitored health care facilities for environmental hazards. He also worked for the past two years as a mutual fund analyst for Brown Brothers Harriman and Co. in Boston.

Davidson is a highly selective independent liberal arts college for 1,700 students located 20 minutes north of Charlotte in Davidson, N.C. Since its establishment in 1837 by Presbyterians, the college has graduated 23 Rhodes Scholars and is consistently regarded as one of the top liberal arts colleges in the country. Through The Davidson Trust, the college became the first liberal arts institution in the nation to replace loans with grants in all financial aid packages, giving all students the opportunity to graduate debt-free. Davidson competes in NCAA athletics at the Division I level, and a longstanding Honor Code is central to student life at the college.
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Posted By: Bill Giduz