By Geraldine Fabrikant
The New York Times
March 22, 2019
In 2005, Paula Volent, the head of the Bowdoin College endowment, wanted to move some of the college’s money into a Sequoia Capital venture fund focused on China.
But Stanley F. Druckenmiller, a prominent hedge fund manager and influential member of the college’s investment committee, didn’t like the idea. “I was pretty aggressive at pushing back because I thought it was too risky,” he said. “I did not get the whole China thing.”
Ms. Volent didn’t take no for an answer. “We pulled together a detailed memo” that persuaded the committee to approve her plan, she said.
It turned out to be a profitable decision. Bowdoin invested $500,000, which had swelled to $3.75 million by June 30. “It has been a complete home run,” Mr. Druckenmiller happily conceded.
That has hardly been Ms. Volent’s only smart move since 2000, when she began managing the Bowdoin endowment. In that time, the little liberal arts college in Brunswick, Me., has risen to the top of the heap in financial performance.
Bowdoin posted an 8.8 percent average annual return over the 10 years that ended June 30, handily beating the 6 percent average for all college endowments with assets of more than $1 billion, according to a national study.
The school also outperformed all eight Ivy League endowments, none of which managed to beat the 8.1 percent average annual performance of a plain vanilla portfolio consisting of stock and bond indexes, according to Markov Processes International, a research firm.
What’s more, Ms. Volent, 62, achieved this feat as something of a pioneer in a male-dominated field. Only 16 percent of comparable college endowments are run by women, according to data from Charles Skorina, whose firm recruits chief investment officers.
Her own path has been unique, but Ms. Volent said the field could be a great one for women. “I really hope young women will not shy away from careers in finance,” she said during an interview at her small office on the Bowdoin campus.
Aside from its financial rewards, Ms. Volent said, managing a college endowment is a way of doing good. A rising endowment can give “students who could not otherwise afford to get an education the chance to get one,” she said. That has been the case at Bowdown. In the 2018 fiscal year, the college said, the endowment provided roughly three-quarters of the school’s $41.6 million financial aid budget.
Not Your Usual Paper Assets
Ms. Volent found her way to asset management through a circuitous route. After receiving a degree in art history and chemistry from the University of New Hampshire, she took a job at the Bowdoin College Museum of Art in 1980 with the intention of making a career in art conservation. She later earned an advanced degree at New York University’s Institute of Fine Arts and worked at several other museums: the New-York Historical Society, the Palace of Fine Arts in San Francisco and the Los Angeles County Museum of Art.
While running her own paper conservation studio in Los Angeles, Ms. Volent began taking business courses at the University of California, Los Angeles, and realized that she had an aptitude for numbers.
But she discovered her vocation in asset management at Yale, where she earned a master’s in business administration. She also worked at the university’s endowment under David F. Swensen, who has mentored many portfolio managers and developed a highly regarded strategy that includes investments in alternative asset classes like real estate, hedge funds and private equity. Mr. Swensen declined to comment for this article.
Ms. Volent recalled her start with Mr. Swensen with a smile: “I think he hired me because he wanted to write a book and he thought I was a good writer,” she said. She helped him write the book — and he helped her learn a new trade.
“I fell in love with finance and endowments,” Ms. Volent said. “No question was too silly. You could ask David anything.”
In 2000, she returned to Bowdoin as the manager of the endowment, which then held only about $465 million in assets. By the end of the fiscal year last June 30, it had climbed to $1.63 billion.
Clayton Rose, Bowdoin’s president, gave Ms. Volent and her staff of six much of the credit but, in a statement, also praised “the discipline and foresight of our Investment Committee.” It plays a supervisory role now, but when Ms. Volent arrived at the endowment it did a great deal of the hands-on work itself, with the assistance of Cambridge Associates, an investment firm.
Ellen Shuman, a former Bowdoin trustee and Investment Committee member, said skilled, full-time portfolio managers like Ms. Volent tended to do better than committees.
“Investment committees are poor stewards of capital,” said Ms. Shuman, a partner at Edgehill Endowment Partners, where she manages money for nonprofits. “They each want people they know as managers. They are not there watching the managers day to day and monitoring the portfolio.”
Learning From Two Giants
Mr. Druckenmiller, the chairman of the Investment Committee, has been an enduring influence on Ms. Volent, who said she had incorporated lessons from him, as well as from Mr. Swensen, in formulating her approach.
Unlike Mr. Swensen, for example, Mr. Druckenmiller is a practitioner of short-term trading based on macroeconomic trends. He has a formidable reputation, both in his own right and as the manager of George Soros’s Quantum Fund. He managed that fund when Mr. Soros made a fortune by betting against the British pound.
“I think that the long view that was drilled into me at Yale complements Stan’s shorter-term market values,” Ms. Volent said. “From each of them, I learned critical thinking.”
Like Mr. Druckenmiller, Ms. Volent favors hedge funds that make macroeconomic bets — investments in equities, currencies and other instruments based on a manager’s views of global economic and political trends. For the most part, Mr. Swensen has avoided such funds, she said.
“David believes that no one can anticipate changes in currencies and interest rates,” Ms. Volent said.
With their high fees and requirement that investors keep their money “locked up” for long periods, hedge funds lately have been “getting bad press,” Ms. Volent said. “But Bowdoin’s best performance has come in periods where protection of capital is key and hedge funds have been additive here.”
Still, the illiquidity of such funds has sometimes been a problem, she said. In the 2008 market meltdown, for example, Bowdoin was unable to withdraw its money from a declining fund, which Ms. Volent declined to identify.
“We were ring fenced,” she recalled. On balance, however, she finds such funds useful, she said.
As the endowment’s assets have grown, so has Ms. Volent’s compensation. In 2016, the most recent year for which information is available, she earned $2.78 million, according to Bowdoin’s government filings. That’s high for the amount of money she manages, Mr. Skorina said, but the endowment’s performance has been exceptional.
Mr. Druckenmiller said Ms. Volent’s background in art might have made her more creative than most financial managers.
“It can’t be overemphasized,” he said. “She does not have a cookie-cutter financial background.”
He added that she liked to develop younger managers and stick with them.
“She will work with managers that others might think are too young or inexperienced,” Mr. Druckenmiller said. “But if you are willing to invest with a manager earlier in their cycle, then you could have 15 or 20 years of outperformance. Last year, we had a 29-year-old manager who was up 35 percent.”
Ms. Volent said her work in art restoration had taught her the need for concentrated study before plunging into action.
“Art conservation and investment management are similar,” she said. “You do a lot of preliminary work. You don’t want to drop an artwork in a solution and it disappears. The same is true in investments.”
They Know Bowdoin Now
While Bowdoin’s strong returns have gotten attention lately, it wasn’t always easy to persuade outside fund managers to work with the endowment. In contrast to Yale, Ms. Volent said, “no one even knew what Bowdoin was.”
But she has been relentless, Mr. Druckenmiller said, during a 7 a.m. interview in his Manhattan office.
“Paula can be dogged when she thinks an investment will work for Bowdoin,” he said. When outside funds have been closed to the school, he said, “she will cultivate them for years.”
“Sometimes I think they take us just to get her off their backs,” he added.
In assessing fund managers, Ms. Volent said, she looks for more than a strong performance record. “The numbers are important in illustrating patterns,” she said, “but they are only useful if they are used with qualitative good judgment.”
For example, Ms. Volent recalled a meeting with a manager who had impressed her until he said he had to leave because his private jet was waiting. That sense of entitlement was a turnoff, she said.
“We like to invest with managers who are small and hungry to establish themselves,” she said. “The jet suggested that he had already gathered a lot of personal assets and was not as focused on his portfolio.”
Some of Bowdoin’s investments have been managed by funds in which trustees and investment committee members have an interest. In 2018, 8.2 percent of Bowdoin’s total holdings were in such “related party” funds, the college’s government filings show.
More than half of the 809 schools surveyed by the National Association of College and University Business Officers permit such arrangements. Many require “recusal and disclosure” to safeguard against conflicts of interest. Such issues have been raised at several schools, including the University of Michigan and Dartmouth College. Ms. Volent said Bowdoin required the disclosure of potential conflicts.
One of her greatest challenges is finding promising areas for investment. She has been pursuing contrarian ideas in recent months, considering investments in Britain, which has been in turmoil over Brexit — the country’s pending exit from the European Union. “When there is so much volatility, investors may have to get rid of stuff,” Ms. Volent said.
That may be difficult for Britain, but for a small college in Maine, it might lead to good things. “There may be opportunities for Bowdoin,” she said.