As of March, the University’s endowment has increased by $4,000,000 since the end of the 2011 fiscal year (FY), from $601 million to $605 million. Chief Investment Officer (CIO) Anne Martin explained that the University’s endowment saw a 21 percent increase in FY 2011. Though the increase is not as steep this year, the growth was still significant, particularly considering the FY for 2012 does not close until June.

“The reason we have an endowment is to support the University’s budget,” Martin said. “We support 13 percent of the budget of the University by distributing money out of the endowment every year. We try to make good returns through our investments, and then we use part of that return to support the University’s budget.”

The spending for the Investment Office this FY was approximately $29 million dollars. Martin stated that by March, they had paid out three quarters of that $29 million.

“We have to grow the endowment by the amount we send to the University, plus inflation,” Martin said. “So our goals for returns for the endowment is spending plus inflation over the long-term.”

Martin also stressed the importance of long-term goals in investment.

“We don’t really think about one-year returns—we have to think about ten-year returns,” Martin said. “One-year’s returns can be very idiosyncratic.”

Martin added that the ultimate aim of the Investment Office is to have a return of 8.5 to 9 percent on investments, which would account for approximately 5 percent of spending plus about 3.5 percent inflation.

Additionally, she addressed the progress made toward achieving more transparency between the Investment Office and the greater University community in the aftermath of the allegations against former CIO Thomas Kannam in the fall of 2009. In order to inform the community about the University’s investments, the office releases an annual report, which includes how the office managed the endowment, their philosophy regarding investment, and the returns over one-year, five-year, and longer periods.

Martin said that the office will prepare another report in June explaining what drove returns or loses in FY 2012.

“We want people to understand that we’re not just picking Apple stock or spinning a roulette wheel,” Martin said. “We’re trying to apply modern portfolio theory, maintain a diversified portfolio, pick the best managers we can, and reduce risk as much as possible.”

  • Old Grad

    “Martin added that the ultimate aim of the Investment Office is to have a return of 8.5 to 9 percent on investments, which would account for approximately 5 percent of spending plus about 3.5 percent inflation.”

    I doubt she said it exactly that way, as it doesn’t really make sense as written. But if Wesleyan is counting on 9% investment returns, a big risk is being taken. This is a much higher rate of return than any responsible actuary would allow for fiduciary accounts.

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