Seth Alexander, president of MITIMCo, aka the Massachusetts Institute of Technology Investment Management Company, is considered one of the top managers in the field.

Alexander got his start in endowment management after taking a course taught by Yale’s legendary manager, David Swensen, and later went to work for him at the school before joining MIT in 2006.

He learned well. MIT saw a 55.5% return for its unitized pool of endowment and other MIT funds during the fiscal year ending June 30, as measured using valuations received within one month of fiscal year end. This was its strongest annual performance in more than 20 years. At the end of the fiscal year, the endowment’s value stood at $27.4 billion, an increase of $9 billion.

Gains accrued across the board. A portfolio breakdown, as published in MIT’s 2021 Treasurer’s Report, showed this year’s return driver came from private equity positions run by external managers, a position that doubled to $11.7 billion. Private equity is the portfolio’s biggest holding at almost 43% of its total asset value. MIT also allocated to external managers for absolute return, domestic equity, and foreign equity, plus real estate and real asset commingled funds. MIT’s internally managed equity, debt, and real estate positions also rose.

Alexander is considered by his peers to be one of the most innovative investors. Some of his innovations include creating a generalist team; seeking exceptional managers who may have a strength in particular area to give the team a competitive edge, rather than seeking managers who fit strict asset class categories; and investing in young managers. In an interview with MIT’s Planned Giving department, Alexander underscored what others say about him, explaining that developing strong, long-term partnerships with exceptional external investment managers is a primary component of his investment strategy.

In a 2014 interview with The Manual of Ideas, he laid out some of his thinking about manager selection. (He declined an interview with CIO.) Alexander says when building the team, he looks for an investor’s passion over experience, wanting people with all levels of experience to apply.

In the interview, Alexander said, “We also look for people who get excited about the ways MIT contributes to cancer research and alternative energy research and other efforts. … We [want] people with all levels of experience to come in and contribute as investors and partners.”

How young and small are those managers? On MIT’s website, Alexander says he wants to engage with firms with “unusually long time horizons” and firms with few assets under management (AUM), noting the fund historically invests with firms with as little as $5 million in AUM. “No firm is too small, too young, or too ‘non-institutional,’” MIT’s website says. “The hiring of an exceptional manager can impact the portfolio for decades, as these managers compound capital through a variety of market conditions.”

MITIMCo also does not worry too much about the consequences of deviating from other investors or indexes; doing so would limit the team’s investing ability. According to MIT’s website, this independent thinking means the endowment is willing to have significant exposures to securities and strategies that behave nothing like peers or broad benchmarks. As such, their returns may deviate significantly from others.

“We believe this stance to be a significant potential differentiation for us, as most investors are forced to stay close to peers and benchmarks given that they are subjected to frequent relative return comparisons,” MITIMCo says.

—Debbie Carlson