Chief investment officer Stuart Mason (left), Office of Asset Management assistant director Chris Suedbeck (center), and senior financial analyst Vitali Datsenko, along with treasury operations manager Colleen Davy and cash manager Stacy Hebdon (not pictured), brought innovative asset management strategies to the U.
Innovative asset management
Improvement spotlight of the month
By Meredith Fox
From Brief, February 2, 2005
It was 2002, and the University faced a serious decline in state support. Clearly, cutting costs would not be enough. The University needed to bring in more revenue, and getting aggressive with its money-management strategies was one way to do it. Richard Pfutzenreuter, vice president and chief financial officer, spotted an experienced, savvy money manager: Stuart Mason, a successful Twin Cities investment banker.
Mason attended the M.B.A. program in the Carlson School of Management in the late 1970s and went on to more than 18 successful years in investment banking. He easily could have continued in the private sector. But when Pfutzenreuter called him in the summer of 2002, Mason says it was an easy decision.
"The University of Minnesota is a great organization, a fabulous resource that is a critical component of the fabric of the state," he says. "This was an opportunity that sounded like fun, and I was challenged by the chance to make a difference and add significant value."
This "improvement spotlight" is the first in a monthly series presented by the Office of Service and Continuous Improvement (OSCI), which was established by President Bruininks in June 2004. Each month in Brief, OSCI will turn the spotlight on a University improvement success story.
OSCI's Web site also debuts this week. See www.umn.edu/osci for more project profiles, improvement-related training opportunities, links to resources, and a bimonthly "how-to" column. New resources will be added weekly, so visit often.
Mason took the helm of the University's Office of Asset Management (OAM) on October 1, 2002. Mason and a team of four other investment professionals have had many successes, but the biggest is increasing revenue flowing into the University by about $6 million a year.
Soon after Mason arrived, OAM reevaluated all the University's investment processes. The evaluation included an analysis of cash flows, as well as comparisons of treasury and investment practices with other Big Ten schools and higher education institutions known for their progressive money-management strategies. Benchmarking included surveys created and administered by OAM staff and extensive conversations with peers.
Evaluation revealed an opportunity for significant returns from the University's cash flow account, the Temporary Investment Pool (TIP). While money regularly moves in and out of the pool, an amount in reserve remains relatively constant. OAM saw the opportunity to strategically invest this base amount to increase the University's investment returns.
What is the Temporary Investment
The Office of Asset Management oversees two primary pools of money: the University's endowment, and the University's "checkbook"--which is called the Temporary Investment Pool, or TIP. TIP contains the working capital and the short-term reserves of many U departments. The U pays salaries and other bills from the TIP.
The team members put their heads together and devised an investment strategy for the TIP funds. Then Mason shepherded the new plan through University bureaucracy, proposing and ultimately gaining approval for a Board of Regents policy change that provided for expanded investment instruments.
After the green light from the regents, internal policies and monitoring systems were established. OAM staff began implementation in July 2003 by expanding their investment of TIP funds into government agency bonds, mortgage pools, and corporate bonds. OAM is able to minimize any increased risk related to the strategy by meeting as a team at least weekly to reevaluate their investment strategies, diversifying the investment of TIP funds, and putting a priority on holding investments until they are fully mature.
The TIP investment strategy is yielding approximately $6 million of incremental revenue annually for the University with only modest changes to the investment risk profile. The strategy also puts the University of Minnesota on the leading edge of investment strategies among peer institutions, since fewer than half of the Big Ten universities are engaged in similar investment strategies.
OAM continues to evaluate the model in order to realize even higher returns, contributing to the continuous improvement of the University of Minnesota.
Do you have an improvement success story to tell? E-mail Meredith Fox at firstname.lastname@example.org.
Meredith Fox is community relations coordinator for the Office of Service and Continuous Improvement. She joined the OSCI team in October 2004 from the Minnesota Department of Administration.