Handy takes stock of U.Va.'s endowment
By Rebecca Arrington
people would find the responsibility of a billion-dollar investment
portfolio overwhelming. Alice W. Handy, U.Va. treasurer and president
of the University
of Virginia Investment Management Company (UVIMCO), finds
it nothing short of "invigorating." From her new Fontaine
Research Park office, which resembles a trading room floor, she
recently shared the philosophy behind U.Va.'s endowment, which
under her direction the past 25 years has grown from $60 million
to $1.5 billion, and what she expects the investment future to
Can you describe your management style and a typical day at your
We start bright and early, around 7:30 a.m. ... My day typically
goes from just before 8 a.m. to 6 or 7 p.m. ... The first thing
we do is turn on the TV and see where the markets are. Actually,
my day starts at home by watching the news on CNN ... making my
kid's lunch, walking the dog, and then coming here. ...
Monday morning we start with a staff meeting to find out what
everybody's plans are for the week. ... Then I spend the rest
of the day trying to research new ideas, hire personnel, plan
space, [and] think about the next investment strategy. ... We
spend a lot of time talking to managers.
now we're working very hard on our ventures portfolio. Š It used
to be 4 percent of the [entire] portfolio. But because of what's
going on in the market right now, venture capital makes up roughly
25 percent of [the] endowment. ... I now have two people working
full-time to manage the distributions as they're coming in --
[to] sell them, to reconcile the portfolios, to value [them] on
a daily basis. Those are [huge changes].
allocation: Choosing among broad asset classes such
as stocks versus bonds
The return an investment manager is compared to for performance
A security issued by a borrower that obligates the issuer
to make specified payments to the holder over a specific
Words used to describe investor attitudes. Bullish means
optimistic; bearish means pessimistic.
gains: The amount by which the sale price of a security
exceeds the purchase price.
stock: Equities issued as ownership shares in a publicly
Spreading a portfolio over many investments to avoid excessive
exposure to any one source of risk.
Gift where the donor specifies that only the income (defined
as interest, dividends and capital gains) may be spent.
The original gift must be invested in perpetuity.
management: Process of combining securities in a portfolio
tailored to the investor's preferences and needs, monitoring
that portfolio and evaluating its performance.
capital: Equity investments in fast-growth companies.
The profits are recouped when the so-called portfolio companies
either go public or sell out to other businesses.
How many employees are on your staff?
We have 11, three of whom because of family reasons are working
Can you explain exactly what the endowment is and its importance
to the University?
We call the University endowment the margin of excellence. It
provides funds necessary for outstanding academic programs and
related cultural and athletic activities above and beyond those
appropriated by the commonwealth. ... U.Va.'s endowment is in
the top 25 endowments in the nation, and it's fifth among public
universities, exceeded only by the Texas and Texas A&M universities
and the California system, all of which are significantly larger.
treasurer, manages the University's investments
Exercise "I run with my dog, Gus. We also walk the stairs
at work, which is actually quite nice. I'm also an avid
fan of all of my children's sports and U.Va. sports, and
I tend to release a lot of energy screaming [at] those events.
I get the same way over television sports, too.
"When I come home at night Š I go in the kitchen
and just throw something together. Š I don't use recipes.
... That's my transition between working and home."
reading: Wall Street Journal, Fortune, Newsweek and Business
Week. Also listens to books on tape during frequent travel
to and from Richmond.
Husband Peter Stoudt, a writer; children Nicholas, a
third-year U.Va. commerce student; Jenny, a first-year U.Va.
college student; and Abby, a ninth-grader at Western Albemarle
High School. A cat and dog round out her family.
role: "Being a parent. I absolutely love it."
Alice Warner Handy, the middle of three sisters, was born
and raised in Wilmington, Del. She says her personality
is like her mother's. "She's a 'doer.' She taught mothering
skills very well. I'm quite a good sewer, and I'm a good
cook and ... hostess, and those are skills that my mother
taught me. ... My father always gave of his time and resources
to charitable causes. He ingrained that in us. ... When
I first came to town, I was a Girl Scout leader. I've always
done things like that. It has been important. Now I serve
on a number of boards. ... It's very important to me Š giving
back." Handy also said that her youngest sister, who's
educably mentally retarded, made her childhood extraordinary.
"What she brought to the family was a wonderful experience."
place on Grounds: Pavilion VIII garden. "I was married
there in 1989." The Rotunda is a close second, though.
"I love to take people through the Rotunda and tell
about the history of the University."
Office: I started out, and everybody always laughs about
this, in a conference room with my desk wedged up in a corner
at the top of Madison Hall where the Legal Advisor's office
is now. Š I had to leave whenever there was a meeting. My
job then included reconciling bank statements and making
sure that the transfers to the managers were correct and
reconciling the mortgage loan program, in addition to licensing
all the vehicles, [handling] the University's insurance,
[and] all the payroll and travel advances, etc. So the endowment
was but a portion of the investment officer's job, and I
was the first person that they ever hired [to fill that
What is the endowment total now?
By the end of January, we're estimating the endowment will be
approaching $1.5 billion.
What's the most the University's ever made in a day on its investments?
Well, this isn't realized yet, but the most that U.Va.'s public
section of the venture capital portfolio made in a day is $17
million, though it just as easily could lose that much due to
the volatility of this market. ... We have one stock in the portfolio
right now that has been worth as much as $100 million, which we
bought three years ago for $500,000. These are just examples --
extreme examples, but they show the kind of mania that we're dealing
with in the marketplace right now. ... However, our investment
focus and time frame is long-term, five to 10 years.
Q: Is there a target dollar amount or percentage rate that
U.Va.'s endowment needs to meet?
Our overall objective for the fund is to increase the endowment
by the rate of inflation, plus what we spend from the endowment
-- inflation plus spending -- which is what we're loosely translating
into a 10 percent growth every year. ... We spend roughly 5 percent
of our endowment annually, so in that area we believe that we
can maintain the purchasing power of the endowment so that tomorrow's
students will get the same benefit as today's.
If returns on endowment investments this year are 15 percent,
and 5 percent is being spent, is 10 percent being reinvested?
Q: Does the University invest in socially conscious businesses?
Our major concern is that we are responsible for protecting the
value of the endowment, growing the value of the endowment. ...
We believe that the companies that we [invest with] will be socially
conscious, enlightened companies. And we did have a rather elaborate
proxy voting committee policy of actively managing our proxies
in the late 1980s when [apartheid in] South Africa was a big issue.
You were hired as U.Va.'s first investment officer in 1974. The
endowment at that time was $60 million. Can you give a brief summary
of the investment history at the University since you've been
Up until the late 1960s, the Board of Visitors actually made the
individual decisions on what stocks to buy and sell. ... In the
late '60s, they hired one manager, John W. Bristol, to make the
decisions for them. It was really the beginning of having a system
at the University where external managers are hired to make all
the decisions on the endowment and still report directly to the
board's Finance Committee.
In 1974, the stock market had been going down almost steadily
for two years. The board made the decision ... to diversify rather
than exit stocks. ... They decided to hire four managers ... and
to keep the endowment invested 75 percent in stocks, which was
an extraordinarily high level relative to our peers at that time.
... When I came on in '74, all of this had been accomplished.
In early 1980, we decided to diversify the portfolio away from
just stocks and bonds and thought we were big enough to go into
some other asset classes. There were three in particular that
were developing a lot of attention at that time. One was real
estate. The second was international stocks, which up until then
very few endowments invested in at all, which seems hard to believe
now, and [third] was venture capital. We did the teeniest little
investment in venture capital, which also seems hard to believe
the 1987 crash, everything changed in the market. First, there
became a belief that you don't have to worry about a crash because
it will rebound right away, which is what it did. A false belief,
but more than that, international became more widely accepted
as an asset class, [and] ... all kinds of new asset classes [emerged].
... What really grew up were two industries that we didn't really
have before Š the hedge fund industry and the private equity industry.
In the '80s the markets were truly wonderful. ... It was something
in the [neighborhood of] 15 percent. We normally think of long-term
returns in stocks as being 10 percent. ... Instead of the '90s
being worse than the '80s, they were even better. The stock market
went up tremendously, [but] we were postured more conservatively
because we had locked into these asset classes that long-term
cyclically should do better than stocks. They didn't do better
during the mid-1990s [because of the soar] in the stock market
until .. our venture capital portfolio took off. We [have] had
some absolutely phenomenal gains that have wiped out in the last
six months all of our under-performance during the whole 
years, and those are the kinds of things that you hope for.
Q: So the current breakdown is 80 percent stocks and 20 percent
Right. ... One year ago, the Finance Committee delegated all responsibility
for the endowment other than actual guidelines and policy statements
to ... its subcommittee, known as the University of Virginia Investment
Management Company. ... The intent behind UVIMCO is to provide
continuity to the management of the endowment Š and to get outside
...investment expertise to the board. Š This was the first time
that we had ever had outside members. ... They are not voting
members, although the chairman is very careful to consider their
opinions. ... Bill Goodwin, as chair of the Finance Committee,
is automatically the chair of the UVIMCO board. ... It's been
wildly successful in that for the very first time we have people
who understand well the strategies that we're talking about before
we go in. So for my purposes, it's really provided a whole new
source of [inputs] into how we think about issues.
How many members are on the subcommittee?
A: Ten. Five Board of Visitors members, plus four [board of visitors-appointed]
alumni who also are in the investment business Š and the ex officio
member, who is the president or his designee. Right now, Leonard
Sandridge serves as the ex officio member.
And what is your role?
I am president of the company, and all of my staff serves on the
company. I also jointly hold the title of treasurer of the University,
and one of my staff members, Rob Freer, is assistant treasurer.
[UVIMCO] sounds like it's incorporated, but it's not. It's a department,
like any other at the University, but it does have a direct report
to its board.
Do you want to make any predictions about the investment future?
Well, let me take that a little differently. We're working on
several major strategies right now. Š One is obviously technology.
Š We've hired a hedge fund manager [to work with] specific technology
portfolio for us. In addition, we have a significant venture capital
portfolio. Second Š we think there are two major foreign [opportunities].
One is Asia, which was beaten down so badly a year ago that we
think there's extraordinary opportunity over there. [The other
is consolidations in Europe.]
we talk about predictions, I guess what I'd say is, we know a
couple of things. We always look at history to try to give us
some insights, because it's all that we have. We know historically
that markets are cyclical, and we know that we're in a huge technology
bubble right now. I believe that there is a huge change going
on in the world, caused by technology, and that we're all going
to be doing business differently.
we also know from history is that [only] a very small portion
of these technology companies out there right now will survive,
and the winners may actually not even [exist] now. So we know
that we need to make extraordinary [decisions] in the way that
we approach it. ...We think all the time about it, but we also
know that we need to lock in [profits] whenever we can because
[that particular area of the market is so volatile].
What made you decide to major in economics and go into business?
A: I had a very flamboyant economics professor at Connecticut
College who was just wonderful. So I ended up majoring in it.
... I graduated from college in 1970, and of course we were in
the throes of the Vietnam War. ... I went to an insurance company,
and they asked me what I wanted to do. I said I wanted to work
with people, because it was 1970 after all. They saw that I had
an economics degree, and they had no female executives. ... So
they shot me up to the investment department.
luck, although I was always interested in investments. I had a
choice between being a bond or stock analyst. I didn't even know
enough to say which one I wanted to be. But they ended up putting
me in bonds, which was the best decision, because within four
years, I was managing a multibillion-dollar portfolio. Four years
later I came here, and as you know, we do have some bonds, but
it's mostly stocks. I made the transition, though.
I do equate investment business to being a lot gut reaction and
a lot liking people. I don't think I was so far off when I said
I wanted to work with people. You obviously have to understand
what you're doing, but you really do have to be able to harness
the resources that are out there. I think that's what I do best.
It's not being the smartest person and always coming up with the
best ideas. It's knowing who to get the best ideas from.
Do you have any tips for the small-time investor, perhaps a U.Va.
employee who has $1,000 to invest?
Whenever an individual asks me, I always say to them, "If
you really don't get excited about opening the Wall Street Journal
and looking at it every day and wanting to have that excitement
in your life, then [stick to a mutual fund plan]." For those
who choose to buy individual stocks, I tell them, "You need
to be as much in stocks as you feel comfortable being in, recognizing
that this is a huge bubble and nobody knows when and if it's going
to burst. Š Otherwise, stay with your plain-vanilla, big stock
funds and bond portfolio. And don't look at it every day."
... I also tell people if they want to buy individual stocks,
buy something they know.
What legacy do you hope to leave?
My legacy will be an endowment that is among the best of a major
university when I walk out of here. I want it to be well run.
I want it to be a model portfolio. I want to have mentored my
staff so that they're capable of taking better jobs. ... I want
people to come looking here for the best people that they can
find in the business.
Has your perspective of the University changed since two of your
three children now attend U.Va.?
A: Yes. I've seen the whole other side. Š And I have thoroughly
enjoyed that -- getting to know the other kids that my kids hang
out with at U.Va. I have a much greater appreciation for the operations
people and how they work, and I'm much more interested in the
academic side and how it comes forward. I guess what I'd say is,
it's really nice to know that you're working for such a good cause.
There's something about that that's fun and it's reinforcing ...working
for a not-for-profit organization.