By Shelby Brown–
The U of L Foundation’s interim director says the dwindling non-profit will be stabilized by following previously-ignored financial advice from its investment managers.
“They gave certain advice that wasn’t necessarily heeded or accepted,” Keith Sherman said. “We’ve seen what happens or what could happen, worst case scenario. So we’re listening carefully.”
Cambridge Associates managers explained the foundation’s investment performance and endowment funds with the finance committee.
“We’d rather be conservative and experience the windfall above and beyond those conservative approaches,” Sherman said.
ULF’s total assets are $789 million, up $4.6 million since December 2016.
Managing Director at Cambridge Associates, Letitia Johnson, said the foundation’s assets are driven by returns in the market, spending and gifts.
The first 10 months of this fiscal year have shown a 57 percent plunge in donations to the university.
Sherman is optimistic donors will return to the university after the forensic audit is presented to the Board of Trustees June 8.
Johnson said Cambridge does not rely on donations when looking at the portfolio. “We think about your spending,” Johnson said. “We tried to be as conservative as possible.”
While Cambridge’s goal is to generate higher returns without additional volatility, foundation board member and Papa Johns CEO John Schnatter had a different idea.
“I want a black swan,” Schnatter said. “When things go catastrophic, good or bad, that’s where you make all your money.”
A black swan is a business term for an occurrence that deviates from the norm of a situation and is extremely difficult to predict.
While discussing investment returns, Schnatter brought up former U of L president James Ramsey. After being told the managers aim for a $30 million return, he said, “Ramsey took a million and a half off the table last year, so he gets five percent of the take? Do I have my math right?”
The foundation’s investments earned 9.7 percent historically, according the Cambridge’s report. Cambridge said the foundation should expect investment earnings of 2.8 percent this year.
Schnatter also criticized how the foundation board votes members on and off. He said board members voting on each other was a conflict of interest, calling it the “good ol’ boy system.”
When asked how he would have voting go, Schnatter gave no alternatives.
While reviewing submitted IRS 990 tax forms, Schnatter commented on the salary of Ramsey’s former assistant Kathleen Smith.
“You’ve got $492,000 for an assistant,” he said. “That’s pretty steep. As a board member, I’d like to know if we’re paying an assistant $500,000 a year.”
Schnatter praised the U of L athletics director, but questioned the foundation’s payments to him.
“I’m crazy about Tom Jurich,” Schnatter said before suggesting Jurich be removed from the foundation payroll. Schnatter was corrected that the 990 tax documents were from 2015 and Jurich is on athletic payroll.
Schnatter said the one thing he’s learned is to follow the money. “You’ve just got to,” he said.
Cambridge Associates foundation presentation is available here.
Updated 5/31/17 8:35 p.m.
Photo by Shelby Brown/ The Louisville Cardinal