How Singapore Institute of Technology built a modern endowment framework
When Singapore Institute of Technology (SIT) embarked on establishing its endowment a decade ago, the institution prioritised building strong foundations before receiving any capital, revealed its chief investment officer at AsianInvestor's 14th Southeast Asia Investment Forum in Bangkok on November 8.
"The year before receiving funds gave us crucial time to lay the groundwork," said Tan Li Ping, chief investment officer of SIT's endowment.
"We were able to establish the infrastructure, develop policies and governance structures that continue to serve us today."
SIT Endowment
The endowment faced unique challenges in establishing its governance structure, particularly given the academic focus of its board members.
"Since our university board has a primarily academic focus, finding investment professionals for our Investment Committee required careful consideration," explained Tan.
"We needed to build understanding from the ground up."
The education process began with extensive stakeholder engagement.
"We invested considerable time writing papers and conducting detailed discussions with our Investment Committee," Tan explained. "It was all about building their understanding of investment concepts step by step."
The governance structure was carefully designed to maintain oversight while ensuring efficient decision-making.
"Some organisations might say that the Board should be independent of the Investment Committee. In our case, there's an overlap, which helps maintain alignment while ensuring proper oversight," said Tan.
FROM THE GROUND UP
"Having a culture of continuous improvement means acknowledging that no portfolio is perfect forever," said Tan.
"We continue to maintain a growth mindset that allows us to adapt and evolve as market conditions and institutional needs change."
With the governance structure in place, the endowment focused on creating frameworks that could evolve with the institution's needs.
Also read: Why a Singapore university endowment chose complexity over caution
"The objectives are reviewed every three years or so to ensure they continue to be relevant," said Tan.
"As the university matures, our investment objectives need to adapt. We've moved to inflation-linked targets and adjusted our strategy as the university's operating needs have grown."
Maintaining stakeholder trust through transparent reporting remains crucial.
"Every quarter, we report to ensure the portfolio remains within their risk appetite," said Tan. "It continues to be a very important issue for my investment committee."
BUILDING THE MACHINERY
WTW (then Willis Towers Watson) was engaged as the endowment's consultant during these formative years.
Peter Ryan-Kane, who led the advisory work and now heads PeRK Advisory, recalled the board's exceptional commitment to understanding risk he encountered.
"I have not seen a board or an investment committee spend as much time as this one did understanding drawdown risk," said Ryan-Kane.
PeRK Advisory
"By examining drawdown risk, manager risk, and specific risks over shorter timeframes, while viewing expected returns over longer horizons, we created a more nuanced framework for decision-making," Ryan-Kane said.
"This allowed stakeholders to understand portfolio dynamics across different time periods."
"The liquidity ladders and risk management tools we developed became practical instruments for managing real-world challenges as the portfolio grew."
SIT's endowment setup exemplifies that successful institutional investment frameworks require more than just investment expertise.
"When you think about strategy or portfolio fit, you need machinery behind the scenes around liquidity, liquidity risk, and drawdown risk," he said.
"These are all crucial elements in the minds of well-managed asset owners."