Jonathan Davis

Oxbridge investors fail to win glittering prizes

Jonathan Davis says that if Britain’s ancient universities want to remain world-class, they should take tutorials from Harvard and Yale in how to invest their endowments

Jonathan Davis says that if Britain’s ancient universities want to remain world-class, they should take tutorials from Harvard and Yale in how to invest their endowments

Devotees of the diaries of Harold Nicolson and Alan Clark will feel that they know the cramped apartments at the Albany in Piccadilly as a vicarious second home. It was there that both men would repair after dining and gossiping in clubland; there also, the reader is led to assume, that their extramarital assignations would be consummated. But how many of the millions who pass the Piccadilly entrance to the Albany have ever stopped to wonder who owns the elegant building in which these famous bachelor sets are located? The answer, it turns out, is Peterhouse, the oldest Cambridge college.

In fact, so valuable is the property that it singlehandedly accounts for almost 40 per cent of the published value of the college’s £75 million endowment. Such a concentration of wealth in just one asset stands as an affront to conventional investment wisdom, which emphasises the value of diversification across a range of asset classes. Even by Oxbridge standards, Peterhouse is exceptional, having fully 85 per cent of its investment portfolio tied up in real estate — with the remainder in shares and virtually nothing in bonds, let alone anything as fashionable as hedge funds, commodities and private equity. But the college can invoke no less an authority than John Maynard Keynes to justify its high-focus investment approach.

As bursar of King’s, just up the road, Keynes famously pursued a high-risk (but rewarding) investment strategy with college funds in the 1930s — at one point, according to legend, narrowly avoiding having to take delivery of a large consignment of wheat on whose price he had been speculating in the derivatives market of the day. Keynes’s view — later shared by Warren Buffett, America’s most famous investment sage — was that ‘the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in management in which one thoroughly believes.

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