Enhancing Manager Selection at Princeton Endowment

Last year Andy Golden, the President of Princeton University Investment Company (PRINCO), advised how we should invest.

Look beyond long term;
Bet only where advantaged;
Whole is more than sum.

Preserve real value;
Optimizing discomfort;
Forever is far.

‘Go Where the Money Isn’t’ and More Advice From Endowment Chiefs, Bloomberg

Today he looks beyond the long term by searching for new fund managers and committing to them before other institutional investors discover them.

Because of its age (it was founded in 1746), the deep loyalty of its alumni, and its investing skill, Princeton is, by one measure, the richest major university in the U.S.: Its endowment per student is a stunning $3.2 million. It relies on the fund for half of its annual budget, a bigger proportion than any other Ivy League school.

Princeton picks perhaps three new investment firms a year. By design, two-thirds have less than a three-year record. Golden can build a meaningful position in the most successful companies by getting in early. Once an investment company becomes successful and well-known, everyone wants a piece, and entree becomes tougher. That strategy has led to some of his biggest successes, such as buying into Horowitz’s VC firm, Andreessen Horowitz LLC, before it struck gold with investments in Facebook and Pinterest Inc.

Entrusting money to untried companies requires using a mix of intuition and character judgment. Without intervention, the selection process tends to favor companies whose owners are already part of Princeton’s network and can therefore seem familiar, an implicit bias that can work against women and minorities—something Golden is seeking to counter, however slowly.

Princeton Looks to Break Up the White Male Money Monopoly, Bloomberg

He is optimizing for discomfort by hiring skilled investors with limited experience in managing a fund. The goal is that they will invest in overlooked opportunities and return capital many times over. Only time will tell if he made the right call. Fortunately, the school has more than enough time: forever.

To learn how the team at PRINCO manages the endowment, listen to Andy Golden on Capital Allocators.

Episode 13:  Andrew Golden – Beyond the Long Term

Card catalog wall art inside Firestone Library at Princeton.
Twitter @PULibrary

Post by Marcelino Pantoja