Financial History 144 Winter 2023 - Page 40

Roger Murray assisted Representative Eugene Keogh , pictured here , in his efforts to pass a retirement plan for self-employed workers and got the individual retirement account ( IRA ) into the Employee Retirement Income Security Act ( ERISA ) of 1974 .
Library of Congress
Geoffrey H . Moore , director of research for NBER , stated in a cover letter addressed to the chair of the US Congress Joint Economic Committee that “ Dr . Murray ’ s work is the capstone in a series of studies upon which he and several members of the National Bureau have been engaged for some years .”
National Bureau of Economic Research
President Richard Nixon appointed the Hunt Commission to “ review and study the structure , operation and regulation of the private financial institutions in the United States , for the purpose of formulating recommendations that would improve the functioning of the private financial system .” Roger Murray was involved with the commission ’ s creation of an individual pension plan .
Department of Defense . Department of the Army . Office of the Deputy Chief of Staff for Operations . US Army Audiovisual Center .
appreciated .” Murray wrote the preface to Mennis and Clark ’ s monograph .
After two years of planning , the Common Fund was launched in 1971 by a grant from the Ford Foundation as a non-profit organization . It was chartered with the goal of managing endowment assets for colleges and universities . Murray was a founding trustee of the Common Fund starting in 1969 and board chair from 1977 until 1980 . Murray retired from the Common Fund board in 1981 . Since its inception , the fund has grown assets under management from $ 63 million in 1971 to over $ 25 billion today .
Murray published a paper in 1986 entitled “ The Formative Years : A Founder Reflects ” to celebrate the 25th anniversary of the Common Fund . In that report , Murray reflected , “ By the late 1960s , the returns from college endowments persistently lagged the growth rate in operating budgets . There was increasing concern throughout higher education regarding the future vitality of private institutions .” Murray added , “ As a major donor to education , the Ford Foundation was , therefore , impelled to ask whether there could be some recovery in the prospects for higher education stemming from better management of endowment assets .”
Traditionally , trusts were legally bound to be invested separately ( no commingling with other pools of capital ), and they followed a simple but rigid spending rule : only interest and dividends were available for operations , no matter the need . “ All capital gains were allocated to principal .”
The invention of the variable annuity at TIAA-CREF was what started to challenge the traditional views of managing retirement funds and endowments . According to Murray , TIAA-CREF “ established concepts such as total return and market value accounting as both legitimate and potentially adaptable to endowment administration .” TIAA-CREF also managed a single portfolio for all its policyholders . At the same time , “ the potential of equity securities was receiving a new level of emphasis .” Despite the possibility of higher returns from investing endowments in equities , endowment management continued to be constrained by the traditional separation of principal and income .
The Ford Foundation published a seminal report , “ The Law and Lore of Endowment Funds ,” in 1969 . The report presented a powerful case for a new approach to managing endowment funds , the most significant argument being the importance of total return of the portfolio rather than
simply annual income . The report ushered in a new era of a greater concentration of holding equities in endowment funds .
Murray discussed in the 1986 anniversary report the legal challenges faced by endowment trustees when managing equity portfolios and commingling assets of beneficiaries in a common pool of investments . He explained that resolving these issues led the way to the founding of the Common Fund , whose name was a nod to the fund ’ s new legal structure . At the bottom of a bear market in 1974 , when colleges were withdrawing funds from the Common Fund equity portfolio , Murray wrote a spirited defense for investing in equities in the Common Fund ’ s annual report that same year .” And by happenstance , the best piece I ever wrote and the one that got the widest circulations was a September 1974 article for the annual report of the Common Fund .”
Colleges and universities were withdrawing their equity participation in the Common Fund and investing the money in the bond market because bond yields were more attractive than what was expected in the equity markets . The investment committee of the Common Fund felt a need to address the situation . The board wanted to issue a statement and asked Murray to write
38 FINANCIAL HISTORY | Winter 2023 | www . MoAF . org