Imagine having your performance review done by a blue ribbon panel headed up by your biggest investor. That happened at University of Toronto Asset Management this week as the university acknowledged the problems that led to a massive $1.5 billion loss in a single year that wiped out 30% of its pension and endowment funds.
Led by Hal Jackman, a big donor to the University of Toronto, the panel’s findings blame an aggressive investment strategy at UTAM for the losses and recommended that after 1o years it should be brought back under the university’s direct control. Since its inception in 2000, says the report, UTAM has realized an annualized rate of return of just 2.7%. In addition, it had far more exposure to risk than its peers when the market tanked in 2008. Even the market recovery hasn’t helped says the report — returns were 3.8% in September versus an industry average of 12%.
While the university has a big challenge ahead when it comes to getting its investments on track, another big hurdle will be ongoing communication with its board and trustees. A lot of pension funds seeking to communicate investment decisions to trustees have their hands full post-credit crisis — for the University of Toronto this could be doubly difficult. Consider a Globe and Mail article quoting head of the Faculty Association, George Luste — he called the decision to bring UTAM in “rearranging the deck chairs on the Titanic”.