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Amy Falls had a great year — and that’s making her nervous.

Falls, chief investment officer at
Rockefeller University
’s $2.3 billion endowment, and her team posted an almost 11% gain in the fiscal year ending June 30, topping larger elite schools including

With greater volatility in markets and imbalances in the economy, Falls is taking a more defensive approach since then by purchasing put options on the
biggest tech exchange-traded fund
and exploring macro hedge funds after paring the number of outside money managers the endowment hires.

Falls, who took over at the New York City-based
biomedical research university
in 2011, is taking these measures after the fund benefited from a 58% gain in its venture capital investments and a surge in such technology stocks as
Zoom Video Communications Inc.
, which accounts for more than 4% of the endowment.

In excerpts from an interview with Bloomberg, Falls, 56, discusses the economy, finding the right managers, and diversity at endowments.

Q. How is election news informing your strategy?

A. There’s a lot of focusing on the headlines and not on the underlying fundamentals. I’m concerned because of the imbalances from the impact that Covid has already had on employment and income and fiscal balances and interest-rate policy. The election is important but it’s not a driver. The risk in the market is related to the imbalances that already exist and either person who wins will have to contend with that.

Q: Rockefeller University had one of the better endowment returns this year in higher education. Why are you so concerned about the future?

A: This was definitely a year of dispersion because of the pandemic. There were real winners and losers. I have a great manager who was among one of my worst performers this year but is still one of my favorites. He’s a long-short guy in London. He said, “My problem was I was long travel and short stay-at-home.” Who could have predicted the magnitude of the change? This year was unusual in that it really favored certain sectors. We have a decent amount of biotech and tech and that happened to be a real winner.

Q: What were some other factors that played a role in your returns?

A: We had some unusual payouts last year, so we had to make some aggressive decisions about where we wanted to be. I have a farm; pruning is critical. It’s rare you prune enough. We lost some things we didn’t care as much about — less of the energy space, for instance. Also some traditional multi-strat funds, we’ve pared down. We migrated from broad equity managers who would tend to have 50 to 100 stocks. We’ve really gotten rid of almost all of those managers and concentrated on much more concentrated equity managers with generally 20 to 25 stocks.

Q: Picking the right managers in China didn’t hurt last year. Was that a factor for Rockefeller?

A: I have this graph I always run: the percentage of GDP and the percentage of world equity markets by country. If a country’s percentage of GDP is radically different than its percentage of world equities, usually it reverts. China had grown dramatically in terms of world GDP but its share of world market cap had lagged. So the feeling was we need to find out what active management might look like. A member of my team five years ago mapped every manager in China. There was a list of 50 to 60 active equity managers. We narrowed it down to a list of 15 that we met with, then we narrowed it down to two, who we funded. One of them was up 70% last year.

Q: Is that how you select fund managers?

A: We really like to see people who have a high level of accountability. One thing I always do with managers is I ask if I can read all the letters they’ve ever written. I like to see how they talk about their investments and how they take responsibility for mistakes. If you read the narrative over time you get a sense of what sorts of people airbrush mistakes out of history and what sort of people stand up and say, “We got this one wrong, here’s what we were thinking and here’s what we’ve learned.”

Q: More women have been hired in recent years to run endowments. Is the industry doing enough to promote diversity?

A: The field is great for women, although if you ranked endowments and foundations by assets under management and put in the gender of the CIO, I’m sad to say you’d see more males at the top and more females at the smaller endowments. There seems to be still a bit of a hurdle getting into the large endowments.

— With assistance by Josh Friedman