The man behind Penn's $6.8 billion
Peter Ammon, Penn's new CIO, plans to strengthen the relationship between the investment office and undergraduates
September 5, 2013, 3:57 pm · Updated September 5, 2013, 11:39 pm·
Michele Ozer | DP
When Penn tapped Peter Ammon last semester to head its $6.8-billion endowment, the appointment caught the attention of much of the higher-education investment community.
Ammon had spent the past eight years working alongside David Swensen, whose investment decisions at Yale University have brought in billions for the New Haven institution. Swensen, Yale’s investment chief since 1985, was the brainchild behind the so-called “Yale Model,” an investment philosophy that has produced top-flight returns for Yale. From 2004 to 2007, the Yale Model helped the university bring in annual investment returns near or above 20 percent, a level of performance that went unmatched by any of the institution’s peers.
Now, Ammon is looking to replicate that success at Penn.
Ammon, who was named the third chief investment officer in the University’s history in April, began his post at Penn on July 1. A former director in Yale’s investment office, Ammon said that his time working under Swensen was hugely influential.
“I learned the importance there of why the investment office should be connected to the institution,” said Ammon, who at 36 years old is currently the youngest Ivy League chief investment officer. “Yale showed me that you need investors who care deeply about the institution.”
Ammon also spent time earlier in his career working at the Princeton University Investment Company.
Over the past decade, Penn’s endowment, led by former Chief Investment Officer Kristin Gilbertson, has made a strong push to emulate the success that institutions like Harvard and Yale universities have had. For years, the University’s endowment was largely equity-oriented; in the mid-2000s, Penn’s underdeveloped portfolio in private equity, real estate and natural resources meant that the University could not fully capitalize on the investment boon that those asset classes were producing.
Over the years, Gilbertson, who began as chief investment officer in 2004 and has called Penn’s endowment a “late bloomer,” worked to diversify the University’s portfolio. She made it a priority to slowly build Penn’s holdings in illiquid assets, which describe investments that are not easily converted into cash, like private equity and natural resources. Both of those principles — a measured diversification over time and a reliance on illiquids — are central to what Swensen has preached through the Yale Model.
The appointment of Ammon, said Executive Vice President Craig Carnaroli, should not be taken as a sign that Penn is looking to take a leaf out of Yale’s book. “It’s not as if we said, ‘We like those Yale numbers, give us a guy from Yale who can get us those returns,” he said.
Ammon’s selection, Carnaroli said, reflects the enormous growth of the University’s investments over the years. Penn’s endowment has doubled from $3.4 billion at the end of the 2002 fiscal year to $6.8 billion at the end of the 2012 fiscal year. “Because the endowment is larger, it’s also more complex to manage,” he said. “You need a person who’s capable of operating in that complex environment. Peter’s background says that he’s been mentored by people who’ve given him the skills to do that.”
Penn’s endowment is the fifth largest in the Ivy League, behind Harvard, Yale, Princeton and Columbia universities. At $30.7 billion and $19.3 billion as of last June, respectively, Harvard and Yale have the largest university endowments in the country.
Some of the most significant lessons Ammon learned from his time at Yale, he said, have less to do with day-to-day investing and more to do with building relationships with investment managers and office staff.
Yale’s investment office is known for recruiting heavily from the institution’s undergraduate and graduate student bodies — many investment staff today came to work there through an internship program that the office runs. In the future, Ammon said, he hopes to recruit more heavily among undergraduates and Wharton MBA students. He has also considered creating an internship program in Penn’s investment office.
When he was at Yale, Ammon co-taught a Yale School of Management course on endowment management with Dean Takahashi, the investment office’s senior director. During his time at Penn, he said he is interested in teaching a similar Wharton course. “That’s a great way for us to meet students, and to build connections that may be valuable for us,” he said.
In addition to building relationships with current students, Ammon noted that it will be vital for Penn’s investment office to tap into the University’s alumni community. “I think one of Penn’s great advantages relative to many other institutions is that it has an amazing alumni base,” Ammon said. “We need to be very thoughtful about how we work with the alumni base. It’s a great, high-quality network.”
Building new connections with alumni, he added, can open up investment opportunities for the University, as well as give the investment office access to top managers that it might otherwise not have had.
In many regards, said Anne Martin, Wesleyan University’s chief investment officer, Ammon’s management style and work ethic is similar to Swensen’s. “He’s a terrific manager of people,” Martin, who worked at Yale before moving to Wesleyan, said of Ammon. “There’s a certain quality of person who can rise to become a CIO, and Peter has that quality.”