At the $4.81 University of Illinois System endowment, Senior Director of Investments Geri Melchiorre focuses on turning complex issues into practical solutions.

Since joining the system in 2012, Melchiorre has been a part of and has overseen a transformation of the investment program. She has shifted the endowment from a consultant-driven, public markets-heavy portfolio to a diversified platform spanning private credit, private equity, venture capital and real assets.

The endowment recently adopted a new sourcing model that broadens its reach beyond its investment consultant and utilizes recommendations of both peers and the university’s alumni network.

Under Melchiorre, the investment team also added a scenario analysis tool that allows it to model interest rate environments by substantially shifting its fixed-income duration.

“[It] allowed us to really understand the impacts of yield curve changes and spreads widening and tightening,” Melchiorre says. “It gives us the ability to say, ‘OK, if this scenario happens, in 12 months, we’re looking at this yield curve’ instead of where we are today. Then, ‘Here’s the risk-and-return benefits or penalties we could see.’”

The tool was especially helpful for the endowment in late 2020 and early 2021.’

“There just wasn’t anything to be gained by being longer on the curve, so we ended up moving to really short duration, and that saved over $100 million for the university,” Melchiorre says.

Melchiorre led the endowment’s first internally driven asset allocation study during a time of funding uncertainty and liquidity stress. Like many institutions, the university faced federal funding cuts and market volatility in an ever-changing environment.

In response, Melchiorre and her team developed a proprietary approach to designing a liquidity budget that served as a foundation for the asset allocation study.

“We conducted a detailed analysis of approximately 700 additional sources of endowment capital, allowing us to better understand the residual liquidity risk of restriction and spending dynamics,” Melchiorre says. “To reinforce our conclusions, we stressed the portfolio under potential redemption scenarios and market conditions to illustrate how various liquidity allocations could impact operational flexibility and rebalancing capacity.”

The investment office has also been an early adopter of artificial intelligence-based tools to expand its teams’ analytical capabilities.

Melchiorre points to her nontraditional background as helping her think outside the box in the role. For example, the fund requested and received a legislative exemption from the state of Illinois procurement code, allowing the investment team to select managers and other counterparties outside of a rigid state-led process.

“I didn’t come from an existing institutional investment program; I came from a different background doing risk management at Northern Trust in consulting,” Melchiorre says. “I think that allowed me to have fewer preconceived notions of how things should be done and think outside the box more and come up with new and different ideas, rather than something that’s been done only in the past.”

—Matt Toledo