In early October of last year, President Michael Roth spoke to the Wesleyan Student Assembly (WSA) about his plans for the future of the University—most notably, his goal of doubling the endowment within five to eight years. Today, however, the dismal reality of the economy is beginning to sink in: for Fiscal Year (FY) 2008, which spanned from July 1, 2007 to June 30, 2008, the University’s endowment declined by 3.9 percent.

While the University’s projections of the endowment are calculated on a 9 percent expected annual growth, the University has historically performed even better. In FY 2007, the endowment grew by 15 percent, or $91 million, increasing from $620 million to $711 million.

In past years, this 9 percent estimate was a conservative projection of the University’s annual growth. These projections, however, could not have taken into account the U.S. economy’s recent performance.

“The Board of Trustees is concerned about the state of the University’s endowment in the overall economic climate,” said WSA Vice President Saul Carlin ’09. “However, given the performance of the endowment relative to the market as a whole, there is no reason for the board to question the decisions made by the endowment office.”

While the WSA Report from the Board of Trustees Retreat 2007 attributes the endowment’s 15 percent growth in FY 2007 to strong financial markets, investment strategies and strategic planning, it is clear that the numbers for the 2008 report—which the WSA will release on Sunday—will be less promising.

According to Carlin, FY 2008 produced a shortfall of approximately $100 million—the endowment was expected to land in the $700 million range and instead declined into the $600 million range. This shortfall was a result of discrepancies between the University’s projected gains and actual losses in the endowment, in addition to the annual draw on the budget.

According to WSA Finance and Facilities Committee Chair Jen Liebschutz ’11, as of June 30, 2008 the endowment was at approximately $650 million and since then, it has continued to fall.

As Carlin noted, however, the Domestic Equity Market has declined by 10 percent, which puts the endowment’s 3.9 percent decline into perspective.

“While we have not seen the annual growth that the University projected, it’s not like our endowment is down by 50 percent,” he said. “The University is still outperforming the market.”

According to Carlin, the endowment’s asset allocation exposure is broken down into equity investments, marketable alternative investments, non-marketable alternative investments, fixed income investments and fixed assets.

“We have a complicated set of investments that are diversified to minimize risk and maximize growth,” he said. “This asset management strategy has contributed to the University’s small losses in relation to the market.”

Even before the financial crisis hit the United States, the University was working to change its endowment policies. Three years ago, the University implemented a Five Year Reduction plan to reduce Wesleyan’s draw on the endowment.

According to Liebschutz, for 2008-2009, 5.5 percent, or $35 million, of the endowment contributed to the annual budget, which is a $311,000 decrease in endowment support from last year. The annual budget is comprised of everything the University spends in a given year, with a percentage of the endowment contributing to the budget.

For 2008-2009, the University’s annual budget is about $197 million.

“This budget includes $1.3 million in budget restrictions as part of our commitment to bring our endowment spending in line with policy and balance the budget,” according to the 2008-2009 Proposed Operating Budget from Vice President of Finance and Administration John Meerts.

A significant part of the annual budget comes from the Wesleyan Fund, which is composed of the annual fund, the Fund for Excellence, the Campus Renewal Fund and the University Relations Enhancement. In FY 2007, University Relations raised $36.2 million for the Wesleyan Fund, which was the University’s best fundraising year to date.

According to Carlin, the University raised a similar amount of money this year for the University Fund, although it did not surpass last year’s total.

“Individuals are less likely to donate money during difficult financial times, particularly when they are more concerned about the condition of their own wealth,” Carlin said. “The economy has an indirect impact on fundraising performance.”

While the University has just entered the second quarter of FY 2009, which began Oct. 1, the effects of the economy’s performance during these past three months have yet to be quantified.

“Right now, the University must think about its long-range plans,” Carlin said. “However, it’s comforting to know that Wesleyan not alone in this.”

This is the first article in a series on the economy’s effects on the University.

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