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Endowment Management

Exclusive Q&A: McCall Cravens, Managing Director Of Investments At Southern Methodist University's $1.5B Endowment

by trusted insight posted 6years ago 12233 views
McCall Cravens has been the Managing Director of Investments at Southern Methodist University in Dallas, Texas for the past three-and-a-half years, following her role as Director of Investments at the University from 2010 to 2012. As such, she oversees and makes manager recommendations for all asset classes, including long-only equity, fixed income and credit, diversifying strategies, private equity, venture capital, real estate, energy and timberland. Her earlier experience includes investment positions with several private equity funds including Pamlico Capital and Lehman Brothers Real Estate Partners, as well as serving as an analyst at in the M&A group at Wachovia. Mrs. Cravens earned her B.S. at Vanderbilt University, summa cum laude, and also holds an M.B.A. from Harvard Business School.

Mrs. Cravens was recently named on Trusted Insight’s ranked list of The Top 30 Most Influential Women In University Endowments. She graciously spoke with Trusted Insight about her experience as a Managing Director and the world of university endowment investing on September 3. The following interview has been edited and condensed.

Trusted Insight: Do you feel that women are better represented in university endowment investing than, perhaps, other areas of finance?

McCall Cravens: There are a lot of amazing women in this space. I’ve been surprised by how many thoughtful, smart, driven women there are in endowment investing.

Trusted Insight: Do you have any idea why that might be?

McCall Cravens: I think you can balance your work life a little bit better on the endowment side than the GP side. I believe women also are really good at and enjoy the relationship side of this business.

Trusted Insight: Can you tell me about any trends you’ve noticed in endowment investing since you’ve been at Southern Methodist University?

McCall Cravens: Product proliferation. Every year there are new strategies being developed, new ways of going about getting some exposure. People are re-evaluating what a private investment means. The duration of private investments has been extended coming out of the financial crisis and we need to understand if that is temporary or permanent. “Smart Beta” and people pressuring for fees – that’s all true. I don't see one huge trend, just more and more entrances to the investment universe every year.

Trusted Insight: Can you tell me about any surprises related to the performance of any particular asset class?

McCall Cravens: Traditional asset classes have far outperformed alternatives since the financial crisis – maybe that isn’t surprising looking back now, but I don’t think many would have guessed it in 2009. We are starting to see alternatives outperform in the last 12-18 months, but it’s too early to know if the cycle has reversed.

Trusted Insight: What is your biggest challenge to generating returns?

McCall Cravens: I think the biggest challenge to generating returns is the ability to take the appropriate timeframe on something. It’s nearly impossible to time the market just right. The hardest thing is having the patience to stick with your convictions based on a long-term point of view and execute on the strategy you have set forth regardless of short-term market noise. Also, asset allocation drives so much of return over the long-term, but it’s very difficult to be tactical on that front in a fully invested portfolio.

Trusted Insight: Can you tell me a little bit about your investment philosophy?

McCall Cravens: We manage a diversified, balanced portfolio; we try to get pretty granular when we think an exposure is overpriced and try to reallocate to things that are underpriced. I would broadly classify it as value investing, but maintaining exposure to many other factors.

Trusted Insight: What do you look for in a fund?

McCall Cravens: We’re very bottom-up, idiosyncratic, looking for the next opportunity. We like to find small funds that have a competitive advantage in a certain niche and are able to exploit some inefficiency. We also like alignment with the manager and a partnership of transparency and trust.

Trusted Insight: Can you give me some examples?

McCall Cravens: It’s hard to find anything that screams of apparent value. So we have tended to commit to things like shorter-lived niche private investment funds where we can at least identify the opportunity over the next one-to-two years and the chance to get our money back to redeploy into new ideas within five years. This has included distressed Japanese real estate, European debt and even small balance, underperforming commercial loans here in the U.S. We also moved to more concentrated equity funds where a manager is willing to take conviction in a small number of names.

Trusted Insight: Do you envision any future changes or trends in endowment investing?

McCall Cravens: Cheaper beta and more expensive alpha. Over time our portfolios are becoming more global. This has already happened, but I think will continue to permeate portfolios for years to come.

Trusted Insight: What about your work gives you a sense of pride?

McCall Cravens: I love our larger mission. We all work for a good cause at the end of the day: being able to support the University and being able to make a difference in a student’s life, by a scholarship for example.

Trusted Insight: What inspires you/motivates you the most about your job?

McCall Cravens: Meeting the goals and objectives we have for the university to grow the endowment over time and meeting our long-term return objectives.

Trusted Insight: What do you enjoy the most about your work?

McCall Cravens: Endowments seem to be a coveted LP group. So we get the opportunity to talk with some of the smartest investment managers out there. This is such a privilege and provides me the opportunity to learn new things literally every day about global markets. I love being able to form relationships with both fund managers and my peers in the industry over time. It is fun and challenging to constantly be thinking about what the next five, 10 years will bring.

Trusted Insight:  What is the most exciting thing happening at Southern Methodist University right now?

McCall Cravens: The school is completing a multi-year capital campaign to celebrate its 100th birthday. We’ve had tremendous growth on the campus in the last two or three years. It’s been fun to be a part of all that.

To learn more about the powerful females of institutional investing, check out Trusted Insight's list of The Top 30 Most Influential Women In University Endowment Investing