Q&A with Baylor Chief Investment Officer

In the 2020-2021 academic year, Baylor University appointed Chief Investment Officer Dave Morehead, CFA, to take the helm of the Office of Investments. Below, he shares the impact of philanthropy on the future of the institution.

Q: Can you share your background before coming to Baylor University?

Dave Morehead

Dave Morehead: I grew up in Wheaton, Illinois, where I went to Wheaton College and married my high school sweetheart, Sara. After a few years in the workforce, I attended the University of Chicago Graduate School of Business where I earned an MBA with concentrations in Finance and Entrepreneurship. I continued on in the investment world over the next 15 years with stints in investment-grade fixed income, derivatives risk management, sell side equity research, and hedge fund portfolio management across a variety of types and sizes of organizations, including First Trust, Bank of America, and William Blair, among others. Sara and I have now been married for 26 years, and we have four children (Megan, Madison, Mackenzie, and Michael), three dogs, two cats, and reside in Woodway, Texas.

Q: What brought you and your family to Baylor University?

Dave Morehead: Our story related to coming to Baylor is a providential one. After nearly 20 years on the direct investing/trading side of the investment world, the question of what to do next arose. Our eldest daughter was in second grade at the time and was asking if she was going to see me in the morning. As a hedge fund portfolio manager, I was out the door to work before the kids were awake, so the answer was “no,” but this kicked off a line of thinking about whether I wanted that to be what our kids remembered of their dad. Having traded most assets and securities in the marketable universe by that time, I was also ready for a change. What narrowed our focus was a love for college students. We had worked with the junior high, high school, and college groups at our church during and after college and had found we had a particular rapport with 18-22-year-olds. So, we looked into what we could do that was still investment related, but where we’d be more closely connected to college students. After much prayer, we ended up moving to Texas to join Baylor’s Office of Investments. It’s been a good fit over the past 10 years as the Baylor endowment has grown, our kids have thrived, I’ve helped teach a few classes on campus, and a few handfuls of girls refer to Sara as their “Waco mom.”

Q: Why is increasing the endowment such a focus for Baylor University?

Dave Morehead: Most people don’t fully understand the structure or importance of an endowment, but it is critical to higher education institutions and their students. An endowment is made up of thousands of gifts from donors that provide financial support to students or fund professorships and programs that the university would otherwise have to pay for, effectively lowering the cost of education for students in both manners. Like a retirement account, the larger the endowment is, the more options the institution has to lower tuition, start new programs, hire outstanding faculty, build new facilities, etc. The institutions with the largest endowments not only don’t have to worry about how the higher education landscape might change in the future, but have more options and capability to adapt as change does occur. Baylor’s endowment is approaching $2 billion with returns that are in the top decile of colleges and universities nationally…and we anticipate that the endowment’s returns will continue to outperform in the years ahead.

Q: Can you explain the makeup of Baylor’s Office of Investments and how you approach your work?

Dave Morehead: Baylor’s Office of Investments is staffed with six professionals where two are focused on the marketable investment universe, two manage the private investments in the endowment, and two more address legal, operations, and new business development for our office. We do not manage the endowment’s assets directly, but invest with approximately 75 outstanding investment managers across all asset classes globally. We travel frequently and are in meetings and on the phone almost constantly as we seek out new and developing investment managers who will drive endowment returns going forward. The endowment portfolio is invested in everything from fixed income and equity assets managed by such firms as BlackRock and Wellington to small start-up companies overseen by boutique investment firms that might sell such businesses to an Apple, Google, or Microsoft.

Q: How do you and your team view your role in stewarding the resources here at Baylor University?

Dave Morehead: Stewardship is at the core of how we think about and manage the portfolio. Our office’s top “core value” is integrity. Very close attention is given to risk-adjusted return and we are always cognizant of the fact that these monies are what will enable students to attend Baylor. From a straight finance perspective, I can’t think of a better “investment” than providing education to a deserving student who otherwise wouldn’t be able to go to school. Think about the “return” on that investment! Not only will a Baylor education impact that individual, but their friends and family and future generations. Literally hundreds of people’s lives can be changed because one student is given the chance to attend Baylor by virtue of a scholarship award! We see a lot of interesting investments, but there isn’t anything that can match the “return” of “investing” in a student’s education. It’s why Sara and I, along with prior Baylor Chief Investment Officers, have established scholarship funds at Baylor. So, our office seeks to grow Baylor’s endowment to enable more scholarship monies to be granted going forward, but we do so with an eye to reducing the downside risk associated with those investments as we know people are counting on these dollars for their future.