Investing

Cambridge College Trinity Hall Buys a Bank


Jerwood Library, Trinity Hall Cambridge

Photograph courtesy Andrew Dunn via Wikimedia

Jerwood Library, Trinity Hall Cambridge

(A previous version misidentified the building pictured.)

Since its founding in 1350, Trinity Hall, one of the University of Cambridge’s 31 colleges, has endured the Plague and the English Reformation. Now it’s taking on the banking business. To bolster its endowment, Trinity Hall last year bought half the assets of a troubled regional lender previously controlled by Vladimir Antonov, an ex-owner of the Portsmouth Football Club who’s facing fraud charges in Lithuania. “The perception coming into this process was that banking was a casino business,” says Simon Guest, an engineering instructor at Trinity Hall and a member of its investment committee. “If you stepped back and looked at the big picture, you saw that this could be a highly successful investment.”

Making money is increasingly important for Cambridge and its colleges because the U.K. has cut spending on higher education, prompting street protests against Prime Minister David Cameron’s austerity regime. Cambridge now gets just a third of its funding for teaching and research from the government, down from 50 percent a decade ago. Some colleges, including Trinity Hall, are venturing into riskier investments once unheard of for conservative academic institutions. “The university needs to be more reliant on its endowment and diverse in its investments,” says Trinity Hall Master Martin Daunton, a professor of economic history.

Daunton says his college’s investment strategy now more closely resembles those of America’s Ivy League schools, although taking over a bank goes beyond investments by U.S. universities in hedge funds and other complex vehicles. The riskier approach has its critics: “Let’s allocate the money by buying appropriate index funds,” says Ross Anderson, a Cambridge computer scientist and former member of the university’s governing board. Cambridge’s endowments, including individual college funds, total £4.9 billion ($7.6 billion). That would put the university among the 10 wealthiest U.S. schools, but it’s still dwarfed by those at the top—Harvard’s endowment stood at $30.4 billion and Yale’s at $19.3 billion as of June 2012.

Building Cambridge’s assets was a priority for Alison Richard, who ran the university from 2003 to 2010 after serving as Yale’s provost. “From the day I arrived in Cambridge, my mantra was that we needed to diversify its income,” Richard says. “It’s not healthy for an institution to be too dependent on any single source, whether it is government or the endowment.” She created Cambridge’s internal investment office, a first for a U.K. university, at the end of 2006; since then the endowment has almost doubled.

Trinity Hall’s finances are managed by its bursar, Paul ffolkes Davis. A former investment banker at NM Rothschild & Sons, he’s helped the college’s endowment grow to more than £100 million from £45 million since he arrived in 2004. Davis says the former Pensions Bank controlled by Antonov, now Cambridge & Counties, will become profitable by year-end. Antonov, a London-based banker, was arrested in November 2011 and is being held in the U.K. while he fights extradition for allegedly stealing about $660 million from his Lithuanian bank, Snoras, with an associate. Antonov, whose lawyer didn’t respond to a request for comment, told a British court last year that extradition would put his life at risk. While U.K. regulators barred him from managing his other assets, he made a deal to sell Pensions Bank before his arrest, and the government allowed the sale’s completion.

The college bought its 50 percent stake in Cambridge & Counties for less than £5 million, says Davis, who wouldn’t disclose the exact amount. “This was too good an opportunity to miss,” he says. The college established a Board of Scrutiny to examine the bank’s activities and sit in on bank board meetings. “We want the bank to be an old-fashioned, boring institution,” says the investment committee’s Guest. “We want to avoid any temptation to go into more exotic types of business.”

The bottom line: Cambridge and its 31 colleges are aggressively building their endowments, which total £4.9 billion ($7.6 billion).

Staley is a reporter for Bloomberg News in London.

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