Key Takeaways
- • The American Red Cross has ended its outsourcing arrangement with Cambridge Associates, a little more than two years after the June 2018 handover of day-to-day investment decisions for its endowment and pension fund, according to a person close to the situation.
- • Cambridge Associates has lost discretion over selecting asset managers and deciding where assets are moved, while continuing to advise on the portfolios.
- • The Red Cross remains a paying Cambridge client, suggesting a strategy reversal rather than a major rift, per a person familiar with the situation told Institutional Investor.
- • The organization has two apparent options: hire another outsourced-CIO provider or rebuild an internal investment team; it did not comment on its plans for the assets.
- • The move comes as the multibillion-dollar nonprofit reverses a decision that already departed from typical practice, since endowments and pension funds often find internal staff more cost-effective once portfolios exceed $1 billion.
Summary
The American Red Cross has ended its outsourcing arrangement with Cambridge Associates, a little more than two years into the relationship, according to a person close to the situation reported by Institutional Investor. The change revokes the investment discretion the consultant gained in June 2018, when the philanthropy announced a "strategic decision" to hand day-to-day investment decisions for its endowment and pension fund to the outside firm.
That 2018 decision led to the disbanding of the organization's internal investment team, or what remained after its split with chief investment officer Greg Williamson. Under the revised arrangement, Cambridge continues to advise on the portfolios but no longer controls which asset managers the Red Cross hires or where assets are moved. The source described the change as a strategy reversal rather than a major rift, noting the Red Cross is still a paying Cambridge client. A person connected to the firm said Cambridge is committed to accommodating clients as their investment needs and governance structures evolve.
The Red Cross faces two obvious paths: replacing Cambridge with another outsourced-CIO provider or rebuilding an internal investment team. The nonprofit did not respond to a request for comment on the move or its plans for the assets by publication time.
The multibillion-dollar organization had already departed from common practice by outsourcing in the first place. Institutional Investor notes that pension funds, endowments, and foundations typically find internal staff more cost-effective once portfolios surpass $1 billion, although in-house management is less simple than paying an outside firm for the service.
That 2018 decision led to the disbanding of the organization's internal investment team, or what remained after its split with chief investment officer Greg Williamson. Under the revised arrangement, Cambridge continues to advise on the portfolios but no longer controls which asset managers the Red Cross hires or where assets are moved. The source described the change as a strategy reversal rather than a major rift, noting the Red Cross is still a paying Cambridge client. A person connected to the firm said Cambridge is committed to accommodating clients as their investment needs and governance structures evolve.
The Red Cross faces two obvious paths: replacing Cambridge with another outsourced-CIO provider or rebuilding an internal investment team. The nonprofit did not respond to a request for comment on the move or its plans for the assets by publication time.
The multibillion-dollar organization had already departed from common practice by outsourcing in the first place. Institutional Investor notes that pension funds, endowments, and foundations typically find internal staff more cost-effective once portfolios surpass $1 billion, although in-house management is less simple than paying an outside firm for the service.
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