Private Debt and a University's Endowment Portfolio Decision

This fictional case is written from the perspective of Benjamin Owens, an investment director at Blue Ridge Mountain University (BRMU). Owens is a member of the investment team that manages the school’s $5 billion endowment. He participates in all aspects of endowment management, including asset allocation, investment research, and investment manager selection. He is currently researching private debt to determine whether BRMU should make an allocation to the growing asset class; specifically, he is assessing the merits of an investment with JAM Capital Management, a private-debt fund manager led by Andrew Moneymaker. The case is focused on direct lending, the largest segment of the private-debt industry. It is accompanied by a technical note on private debt (UVA-F-2107) that introduces the private-debt industry and discusses the different types of private debt and the drivers of its growth, including regulatory changes after the global financial crisis (GFC) that limit banks’ ability to lend and the rise of private equity following the GFC. The case introduces students to private debt as an asset class and direct lending as a subcomponent of the asset class, using endowment management and manager selection as an avenue for exploring this industry. At the University of Virginia Darden School of Business, this case is used in the second-year elective, “Financial Institutions and Markets.” Private debt is a natural topic in this course, as the asset class has grown dramatically following the GFC and has become an alternative source of debt for borrowers outside of the banking sector. The case can also be used in a course on private capital, private markets, investments, asset management, or private wealth.