The newest addition to our Women in Finance series is Kathryn Crecelius, the former Chief Investment Officer of Johns Hopkins University’s endowment fund. Ms. Kathryn Crecelius was brought in to oversee the endowment in 2005, after a lengthy career at high-profile organizations including Brown Brothers Harriman, Bank of Boston and M.I.T. (Massachusetts Institute of Technology).
She was instrumental in not only overseeing the fund, but also the creation of an entire department of investment professionals to service the Hopkins endowment.
While not a household name, Ms. Crecelius is very well-respected in the investment community and by former colleagues.
During her tenure at Hopkins, the endowment fund increased from $2.18 billion in assets under advisement to $3.4 billion when she departed in 2016.1,2
That’s an impressive 50% increase under her watch. Subsequently, the fund moved from the bottom quartile of industry performance when she arrived to the top quartile.3
The height of Ms. Crecelius’ career seemingly came in 2013 when she was named Manager of the Year by Institutional Investor Magazine in the ‘Large Endowment’ category.4 The fund enjoyed an impressive one-year return of 12.6% and 3-year return figures also outperformed at 9.3%.5 Kathryn Crecelius announced her retirement in 2016, after managing the endowment for roughly eleven years.
The New Strategy
Her goal wasn’t to hit home runs. Ms. Crecelius looked for opportunities when they presented themselves “while at the same time preserving capital and enabling intergenerational equity for the university”.6 This longer term perspective gave her the ability to disregard the noise generated by Wall Street and the markets.
Despite working for the prior seven years in alternative investments at M.I.T., Ms. Crecelius immediately began reducing that type of exposure for the Hopkins endowment. When she arrived, private equity represented an outsized 60% of the fund’s allocation.7 By 2013 Kathryn Crecelius has slashed that to 17%.8 She also got rid of investments in ‘funds of funds’ for the endowment.
Funds of funds are just what the name implies-a hedge fund, but instead of its holdings being direct investments (such as stocks, bonds, lumber, real estate, etc.) it is comprised simply of other hedge funds.
It is really the ultimate in diversification but viewed by many as an expensive exercise in redundancy. The structure passes on several layers of fees to the investor. She replaced these allocations with more liquid alternatives (known as liquid alts) including various credit strategies.
By replacing investments with cheaper alternatives, the fund will substantially reduce costs, improving performance. Geographically, the fund placed more money overseas into equity bets in developed and emerging markets.
For the fixed income allocation,Kathryn Crecelius kept it simple by investing the endowments funds only in U.S. Treasury bonds.9 The fund previously had significant exposure to TIPS (Treasury Inflation Protected Securities) but this was subsequently shifted into government bonds.
That move proved prescient as interest rates dropped to all-time lows. For example, the yield on the benchmark United States 10-Year Treasury Bond dropped from slightly above 4% in 2005 when she began with the endowment to 1.45% by the end of June 2016, when she departed the fund (as the prices of bonds rise, their yields drop and vice versa).
The strategy paid off very well for not only the endowment, but also Ms. Crecelius.
According to 2011 data supplied by Pension & Investments Online, she was named the #33 highest paid CIO in their Tax-Exempt category (foundations, charities and endowments, etc.) with a total compensation of $825,947.10 This included non-W2 compensation of $80,200.11
Leading the list that year was Jane Mendillo of Harvard Management Company, the company that oversees Harvard’s Endowment, with over $4.7 million in total compensation.12
In addition to bottom line performance, the investment management field highly values the academic credentials and education of its professionals. Ms. Crecelius certainly fits this profile, graduating Summa Cum Laude from Bryn Mawr University and eventually received a doctorate degree from Yale University.13
A true “Renaissance Woman”, ‘Dr.’ Crecelius also speaks four languages proficiently (fluent in two-English and French) according to her LinkedIn profile page.14 If that wasn’t enough, she is also a CFA charter holder.
Prior to joining the Johns Hopkins endowment, Ms. Crecelius was a consultant at Cambridge Associates, a prominent investment consulting firm based in Boston.14 Prior to that position, she managed marketable alternative investments (liquid alts) across town at the Massachusetts Institute of Technology, M.I.T. There, the alternatives portfolio grew from a weighting of 5% to over 20% of their endowment under her tenure.15
This trend towards alternative investments for institutions has been well documented, although the active management strategy has recently been under fire with a number of high profile plans including CALpers announcing cut backs in allocations to hedge funds.
In addition to academic credentials and demonstrated performance, many CIOs come up through the ranks of their institutions corporate finance department or Treasury department. Prior to her arrival at Johns Hopkins, the investments were in fact overseen by the university’s treasury department. Many CIOs also have the CAIA financial designation which demonstrates a command of the alternative investing landscape.
Since leaving the Johns Hopkins’ endowment, Ms. Crecelius has not disappeared from the investment universe. She has engaged in select speaking engagements, including the Asian Venture Capital Journal’s ‘Private Equity and Venture Forum’.16
We wish Ms. Crecelius well in her retirement and applaud her services in the investment management community. She should be an inspiration to those women who are considering financial career options.
The Carey Business School
While Johns Hopkins is still thought of as a preeminent university for medicine, their Carey business school is quickly climbing up the ranks. Though the B-school was just founded in 2007, it was recently awarded the ‘AACSB’ accreditation by the Association to Advance Collegiate Schools of Business.17
Considered a “hallmark of excellence”, less than 5% of the world’s business schools receive this designation.18 This speaks to the Hopkins’ brand which has attracted talented faculty and real world curriculum.
Carey’s popular Global MBA program gives students the knowledge needed in today’s globalized markets. Carey also offers an online MBA in Finance program, providing flexible options for today’s working professionals. The great thing about this ‘Flex’ program is the access to world-class professors and the chance to complete projects on campus, providing invaluable networking opportunities in the shadow of our nation’s capital.