University invests in new CIO

Last month, Carnegie Mellon’s newly appointed treasurer and chief investment officer, Edward Grefenstette, took office.

Grefenstette, a native of Pittsburgh who received his MBA from the Tepper School of Business in 1998, stated that he was “very pleased to be back at Carnegie Mellon.”

Grefenstette has been applauded by members of Tepper.

“The appointment of Ed Grefenstette reflects Ed’s outstanding qualifications. His appointment also reflects the rigorous nature of the MBA program at the Tepper School, where our alumni are prepared to make an immediate and sustained impact in the world,” stated John Sengenberger, director of alumni for the Tepper School.

In his new position, Grefenstette will execute policies decided upon by the Investment Committee of the Board of Trustees, which invests funds from the university’s endowment.

This is a task at which Grefenstette is very experienced: He was cofounder and managing director of Commonwealth Capital Group, LP, a private equity investment firm.

The success of the university’s investments during the six-year term of John Mazur, the previous treasurer, was mixed.
During the 2003 fiscal year, the university’s investments grew at a slow rate of 2.3 percent, according to the 2003 annual report. However, this was an improvement over the previous two years, when the university’s investments lost value.

In 2003, the endowment made up only 5 percent (an amount fixed by the Board of Trustees) of the university’s operating revenue. Tuition and fees, on the other hand, made up 34 percent. Because the amount of money that can be taken from the endowment each year is limited, the rest has to be made up through research and alumni giving.

Grefenstette’s primary goal, he stated, is to continue the growth of the university’s endowment. Since 2001, the endowment has increased 30 percent to approximately $1 billion. While setting tuition rates is outside the jurisdiction of the treasury, a larger endowment could mean less reliance on tuition rates to fund university activity.

“Still, we all understand that the university’s strategic objective of strengthening the endowment’s contribution to the operating budget will certainly support the efforts to control tuition levels in the future,” Grefenstette stated.

Every student has heard Carnegie Mellon’s Cinderella story: The university started as a regional technical school and grew to a top-25 university in less than 100 years. However, the university’s endowment has not grown as quickly. While Carnegie Mellon ranked 21st in U.S. News and World Report’s Best Colleges of 2007, the National Association of College and University Business Officers ranked Carnegie Mellon 69th among colleges and universities in regard to its endowment in 2006.

In contrast, the University of Pittsburgh was ranked 57th academically by U.S. News despite having an endowment ranked 28th by the National Association of College and University Business Officers.

“[CMU] has done a terrific job of making the most of the money we have, which is sometimes referred to as ‘endowment efficiency.’ The university has, in fact, achieved and maintained an impressive standard of excellence with far fewer funds than many other elite institutions,” Grefenstette said.

Grefenstette also feels that the university is well-positioned for expansion. The university funds new buildings on campus and renovations to existing structures through private donations but usually by issuing university bonds.

“The rating agency Standard and Poor’s renewed Carnegie Mellon’s ‘AA’- bond rating for 2006, which affirmed the overall strength and stability of the university,” Grefenstette stated.