The Common Fund Awards Prize to Washington University Professor

October 1996, Westport, Conn. - The Common Fund, which provides investment management for educational institutions, has awarded its Common Fund Prize of $50,000 to Philip H. Dybvig, Ph.D., Boatmen's Bancshares Professor of Banking and Finance at Washington University in St. Louis. The fund celebrated its 25th anniversary by creating this prize to foster research relevant to the management of educational endowments. Focusing on "original research with strong potential to influence practice," the prize went to Dybvig for his research on the relationship between asset allocation and spending policy.

The grant rewards Dybvig's proposal to extend and communicate to practitioners his research on the necessity of establishing a link between a school's budgeting and investment functions. His previous studies have explored the relationship between asset allocation and spending policy, and have shown that the key is to cover relatively fixed expenses through a mix of less risky assets, particularly in bad times. Conversely, schools should be able to invest in a more aggressive asset mix and increase the expenditure level during periods of strong investment results or when additions are made to endowment. Once the new level is established, it is desirable to keep it constant through proper asset allocation techniques.

New research will examine these conclusions under multiple interest rate scenarios and varied asset mix assumptions, as well as provide simulations based on hypothetical and historical stock market returns. Additionally, Dybvig will provide his conclusions in a format useful to endowment managers.

In presenting this award, Robert L. Bovinette, President and Chief Executive Officer of The Common Fund, said: "The Common Fund has a mission to provide incisive investment research on endowment and cash management. The board and staff see the model that Professor Dybvig has developed as an important contribution to the critical relationship of investing and budgeting. We are pleased to be of assistance in nurturing this seminal study which we believe will be useful to practitioners of endowment management."

Dybvig received a bachelor's degree in mathematics and physics from Indiana University and three degrees-master of arts, master of philosophy and a doctoral degree-in economics from Yale University. His first faculty appointment was in the Economics Department at Princeton University. Subsequently, he moved to Yale, where he was tenured, with a joint appointment in Economics and the School of Management. He has been at Washington University since 1988.

The Common Fund is a nonprofit, membership consortium which manages the world's largest pool of endowment and cash assets exclusively for universities, colleges, and independent schools. It manages $17.5 billion for approximately 1,400 member schools and offers investment programs in a broad range of U.S. and foreign securities.