Risk Management

Our first rule of decision-making is "Do no harm."  

We believe that risk management is an integral part of investment strategy, not a separate function within an investment office that produces neatly quantified statistics and reports.  At RMC, risk management is embedded in every decision we make:  which managers to partner with, which projects to pursue, which employees to hire, and most importantly, how to spend our most limited resources:  our time and attention.  RMC integrates risk management with investment strategy to protect the large endowment entrusted to our care.

 

We are inspired by our mission, humbled by its nobility, and motivated to achieve it.  

From inception, the University has had the goal of educating those who would otherwise not have the opportunity.  Rice has, and has always had, 100% need-blind admission; therefore, the endowment supports a large part of the University's annual operating budget each year (>=40%).  Appropriate investment strategy and risk management decisions are crucial to supporting the mission of Rice.  A majority of RMC's staff members, including our CIO, benefitted from educational scholarships.

 

We are keenly aware that investment management is a support function, not an end in itself.  

The University's risk tolerance is key to how we construct our portfolio, and RMC works closely with the University to understand and help shape the institution's goals and its consequent risk parameters.   The CIO of RMC also serves as the University's Treasurer, and many of RMC's board members also serve on the University's finance committee.  This high degree of collaboration and cross-functional oversight ensures that RMC's investment strategy is contemplative of and aligned with all the University's stakeholders, both present and future.

 

Our most important risk tool is understanding the drivers of return in every investment we make.   

Many risks are present in an investment portfolio:  equity, credit, leverage, and illiquidity are just a few of the risks present in (and often necessary to) owning a portfolio that generates sufficiently high return to meet the needs of the University and to protecting intergenerational equity for future students.  No one measure of risk is sufficient or advisable.  At RMC, we continually monitor our investment strategy and risk framework in light of the myriad risks that exist.  Portfolio risk is neither neatly nor wholly quantifiable, but we believe that it is largely knowable.