Partly this is due to Neff himself. A leading proponent of what is variously called the value-oriented, contrarian, or low price/earnings (p/e) ratio school of investing, Neff is a near-legend among investors for his ability to pick winners from among apparently floundering companies and industries. His Windsor Fund outperformed the industry yardstick, the Standard & Poor (S&P) 500, in 21 of the 31 years he managed it. Neff is also possessor of a fine, dry wit and favors down-to-earth language over technical jargon when it comes to describing financial matters. An article in Fortune last year aptly summarized him as "an investor who has a nose for value, a concern for shareholders, and a unique way with words."
It also helps that, with a few exceptions -- the recession years of 1989-1990 comes most vividly to mind -- he's had good news to share. Certainly, that news has been a lot better than it was in the 1970s, the decade before Neff, a non-alumnus whose undergraduate degree is from the University of Toledo and whose MBA is from Case Western Reserve University, was persuaded to take over management of Penn's endowment by then-chair of the trustees, Paul F. Miller Jr., W'50, Hon'81.
In the 18 years since Neff began managing the equity portion of the Associated Investments Fund (AIF), the fund that represents about 73 percent of the University's total endowment, the overall endowment has grown from $200 million to more than $2.5 billion. According to the National Association of College and University Business Officers (NACUBO), Penn currently ranks 12th in total endowment -- though in terms of endowment per student the University continues to lag behind its peers, coming in at 65th.
According to John Fry, the University's executive vice president, preliminary statistics from NACUBO put Penn among the top 25 percent of all endowments in terms of its performance over the last 10 years, "and significantly better for other measurement periods." Under Neff's leadership, the average annual return for Penn's equities has been 18 percent since 1980, compared to 17.1 percent for the S&P 500. "John Neff has consistently exhibited skill and thoroughness in his work as chairman of Penn's investment board and as a University trustee," says Fry. "As a result of his financial talent and sense of responsibility, he has been an extremely valuable trustee both on the investment board and on other committees."
Neff's most recent investment report was on February 20. It's not clear how many more he will deliver. Though he remains as chair of the investment board, he personally manages only about $85 million these days (down from about $1 billion), and is looking to liquidate that as opportunities arise. Neff retired from his position as manager of the Windsor Fund at Wellington Management at the end of 1995, and since then has been gradually winding down his direct involvement with Penn's investments while participating in the board's efforts to replace him. It hasn't been easy.
Over the past two years Penn has been shifting to a system in which several external firms will manage its equity investments rather than a single investment manager like Neff -- a move that brings the University more in line with the practice at comparable institutions. Having multiple managers, including international and emerging markets equity managers, makes for a "significantly more diversified" portfolio, says Fry, adding that, while doing this, the investment board "has continued to maintain a value-orientation."
"We've tried to remain as contrarian as we could," agrees Miller, a member of the investment board who chaired the ad hoc committee that settled on the plan, "but there's no other John Neff out there."
March Contents |
Copyright 1998 The Pennsylvania Gazette Last modified 3/17/98