Carthage College vs Harvard University

May 25, 2018

Bloomberg Businessweek

From his home office in Charlotte, one of the most successful investors in higher education plies his trade in blissful obscurity. Bill Abt employs no stable of hotshot bond traders. He doesn’t dabble in the fanciest Silicon Valley venture capital funds, hedge funds, or the latest computer-driven brainchildren of Ivy League physicists and mathematicians.

Yet Abt, on behalf of Carthage College, in Kenosha, Wis., has returns that beat Harvard’s $37 billion endowment and most others. In the 10 years through the most recent college fiscal year, ended on June 30, 2017, the former beer company executive racked up a 6.2 percent average annual return, according to the school. That performance is better than 90 percent of his peers, based on data from the National Association of College and University Business Officers. Harvard’s endowment, the nation’s largest, averaged just 4.4 percent a year in the same period, in part because of heavy losses on investments in timber and farmland.


KENOSHA - On the verge of retirement, Bill Abt is now a big man on a small campus.

For years, this former beer company executive quietly guided Carthage College's endowment. He didn't run with the large-college crowd and pour cash into hedge funds or hard assets.

He stuck to the simplicity of using mostly low-cost index funds.

And somebody finally took notice.

In early May, the 71-year-old Abt and his strategy were featured by Bloomberg Businessweek. The article noted that Carthage's returns "beat Harvard’s $37 billion endowment and most others."

In 10 years through June 30, 2017, Carthage reported a 6.2% average annual return. During the same period, the article said, Harvard had a 4.4% average annual return, with results weighed down by losses in timber and farmland.

Carthage's performance was in the top 10% nationwide, according to National Association of College and University Business Officers.

Since the article appeared, Abt has been overwhelmed

"It's been crazy," he said. "Half the people on campus here have emailed me, which is great. I've gotten calls from TV stations, wealth managers. I had a wealth manager ask me if I wanted to go into partnership with him."

He has also been called by foundations seeking advice.

The big idea? Keep it simple

But here's the thing: What Abt advocates isn't new or cutting edge. It's a plain-vanilla investment formula of keeping expenses low and gaining diversification through using mostly index mutual funds. During the current bull market, the second longest in history, that's a winning hand.

Carthage invests in 10 Vanguard mutual funds, with a mix of 90% equities and 10% bonds.

Eighty-percent of Carthage's allocation is in index or passive funds, he said. Carthage uses three actively managed funds.

Why has Abt's formula caused a stir?

"They asked me that question in the Bloomberg article," he said. "And I said, 'Maybe it's too easy.' Sometimes, we have to justify our existence."

Now, before you try this at home, understand a few things.

In the endowment world, Carthage is a minnow. Its endowment is around $120 million. Not bad for a school with some 3,000 students, but far below the billions of dollars stashed in endowments at some colleges and universities. Other endowments add diversification through alternative investments like private equity and hedge funds.

Also, there's the time horizon. Individuals invest for a lifetime. Carthage invests in perpetuity.

"This college is going to be here 150 years from now," he said.

Even Abt admits after a lifetime of work, with different retirement plans and investment options over the years, the endowment portfolio is simpler than his personal portfolio.

Abt's legacy will live on

John Swallow, completing his first year as Carthage's president, has bought into the strategy.

"Until I met him and heard the story, I didn't know that institutions pursued that strategy," he said. "Institutions I've been associated with either had investment committee members of the board choosing investment managers or outsourced to a firm that would invest in money managers. I had not seen this model."

And what does he think of the model now?

"I think the results speak for themselves," Swallow said.

Early in his tenure, with Carthage's then-$30 million endowment invested in a mix of stock and bond mutual funds, Abt and then-board chair Ed Smeds did some research on the investment plan.

At the time, Abt said alternative investments were the rage but were "not a good investment for Carthage College."

They latched on to the index fund strategy.

"We felt if we would go with index funds, we'd lower our expenses and perform as well as the bigger institutions," he said.

The bet paid off.

Abt is ready to retire. And he has left Carthage in good hands, pursuing returns with patience and persistence.

Please enter a first name.
Please enter a last name.
Please enter an email address.
Please enter a ZIP code.
Please select an asset level.
1000 characters remaining
Please enter a message.
How We Are Different
Understanding Your Financial Statement
Articles by Dan Cunningham
Investing with Low Cost Index Funds
Pay Yourself First
Why Use a Fiduciary Financial Advisor?
Vermont Financial Planning
Quarterly Booklets
Financial Planning
Investor Resources
Investment Tools
Financial Firm Comparison
The Investment Process
One Day In July in the Media
Local Financial Advisor
How to Switch Financial Advisors
Frequently Asked Questions
Book Recommendations
Types of Investors
One Day In July Careers
Prospect Booklet
Square Mailers
Fee Calculator
Types of Accounts We Manage
Options for Self-Employed Retirement Plans
Saving Strategies
What to do When Receiving a Pension
Investment Tax Strategy: Tax Loss Harvesting
Vermont Investment Management
How to Invest an Inheritance
Investment Tax Strategy: Tax Lot Optimization
Vermont Retirement Planning
How to Make the Best 401k Selections
Investing for Retirement: 401k and More
Vermont Wealth Management
How to Rollover a 401k to an IRA
Investing in Bennington, VT
Vermont Financial Advisors
Investing in Albany, NY
Investing in Saratoga Springs, NY
New Hampshire Financial Advisors
Should I Try to Time the Stock Market?
Mutual Funds vs. ETFs
The Cycle of Investor Emotion
Countering Arguments Against Index Funds
Annuities - Why We Don't Sell Them
Taxes on Investments
How Financial Firms Bill
Low Investment Fees
Retirement Financial Planning
Investing in a Bear Market
Investing in Gold
Is Your Investment Advisor Worth One Percent?
Active vs. Passive Investment Management
Investment Risk vs. Investment Return
Who Supports Index Funds?
Investing Concepts
Does Stock Picking Work?
The Growth and Importance of Female Investors
Behavioral Economics
The Forward P/E Ratio

Vergennes, VT Financial Advisors

206 Main Street, Suite 20

Vergennes, VT 05491

(802) 777-9768

Wayne, PA Financial Advisors

851 Duportail Rd, 2nd Floor

Chesterbrook, PA 19087

(610) 673-0074

Burlington, VT Financial Advisors

77 College Street, Suite 3A

Burlington, VT 05401

(802) 503-8280

Middlebury, VT Financial Advisors

79 Court Street, Suite 1

Middlebury, VT 05753

(802) 829-6954

Hanover, NH Financial Advisors

26 South Main Street, Suite 4

Hanover, NH 03755

(802) 341-0188

Rutland, VT Financial Advisors

734 E US Route 4, Suite 7

Rutland, VT 05701

(802) 829-6954

v 2.4.59 | © One Day In July LLC. All Rights Reserved.