Despite the unexpected success of the Wesleyan Student Assembly (WSA) endowment—the first and only student endowment in the country—during much of the economic recession, it recently saw a three percent drop from $207,819 at the end of the first fiscal quarter of 2010 to around $201,500. This decrease was largely due to a 14.58 percent drop in the value of the WSA endowment’s shares in the Winslow Green Growth Fund, a mutual fund that invests in stocks of “green,” environmentally sustainable companies.
The downturn in the WSA endowment follows three previous quarters of positive, though slowing, returns. The WSA Endowment Committee (WEC) first decided to invest in the Winslow Green Growth Fund last year, when it was still performing well. Approximately 18.65 percent of the WSA endowment is currently invested in this mutual fund.
“Recently, in the past half year, the green sector hasn’t been doing so well, which was honestly a little bit surprising given the pro-environment orientation of the Obama administration,” said Student Budget Committee (SBC) Chair and WEC Chair Andrew Huynh ’11 during the WSA meeting on Sunday, Sept. 16. “There was a feeling that there would be a boost to clean energy, so it seemed like a feasible investment.”
According to Assistant Professor of Economics Abigail Hornstein, while markets in general are highly volatile right now, “green” sector firms are struggling more than the average firm because they often have smaller profit margins to begin with and they tend to appeal to smaller, more specialized groups of consumers.
“With consumer expenditure down right now, ‘green,’ I think, is becoming a luxury for some,” she said.
Most of the companies that the Winslow fund invests in are small to medium-size companies whose stock share values tend to be more unpredictable than those of larger companies. Smaller “green” companies may also be more likely to perform poorly in the current economic climate because they often lack the brand image needed to convince consumers to pay a premium for environmentally sustainable products, according to Hornstein.
Despite the drop, several WSA members said that it is too early to significantly decrease the endowment holdings in the Winslow Green Growth Fund.
“I think that people at the meeting last night were overreacting,” said WSA Sustainability Coordinator Josh Levine ’12. “We’ve had the mutual fund for less than a year—there’s going to be some volatility.”
Nonetheless, according to Huynh, the WSA does plan to reduce its investments in the fund to some extent.
“I don’t want to completely disassociate ourselves with it, because I do think that it has a lot of potential in years to come,” Huynh said. “But to the degree that we’re currently holding shares in this particular mutual fund, we’re probably going to draw down slightly to decrease our exposure to the volatility.”
The WSA will be working with the Investment Office to discuss future endowment decisions, with the hopes of further diversifying the WSA endowment portfolio and moving toward less risky and volatile investments, Hunyh said.
The WSA Endowment was also pulled down during the last quarter by a 3.1 percent decrease in the University Endowment, to which about 30 percent of the WSA Endowment is tied. The remaining WSA Endowment funds lie in fixed-income investments in the PIMCO Total Return Fund III—comprised of bonds that have been deemed “socially responsible”—and in the local MiddConn credit union.
While the holdings in MiddConn offer only .56 percent returns, these returns are very steady and the investments support local businesses.
“The money helps the local Middletown community, so it’s a form of outreach,” Huynh said.
According to Hunyh, MiddConn share certificates will also mature over the next two years and could offer the WEC a chance to move money to somewhere that offers higher returns.
The goal of the WSA endowment is to prevent increases in the $270 Student Activities Fee that all students pay each year. The SBC budget is currently financed entirely through this fee and does not pull funds from the endowment to finance student activities.
“[The decrease] doesn’t affect our ability to serve the student body,” Huynh said.
In the long term, the endowment could hypothetically be used to eliminate the Student Activities Fee altogether, though this will not happen for at least 30 years, according to Huynh.
“At $200,000, there’s just no way that [the WSA endowment] will grow significantly enough to do anything to help reduce or eliminate the student activities fee [within the next 10 years],” he said.