Report Shows Endowment Increased By 12 Percent

by Sophie Zinser, Assistant News Editor

The University’s endowment showed a 12 percent increase from the last fiscal year, according to the recently published annual financial report. The report attributes this rise to a decrease in spending and a record influx of donations. Additionally, the report stated that the University’s endowment now rests at $689 million, a $72 million increase after this year’s spending.

The University’s endowment consists of gifts from alumni and stakeholders. According to Chief Investment Officer Anne Martin, an endowment gift is permanent capital, meaning that the University must invest it rather than spend it. Martin said that this year the strategic investments that the University Investment Officers made provided returns for the endowment.

“Our goal is to invest in the endowment in a way that will continue to provide for it,” Martin said. “We want to invest our endowment across a number of different strategies that we think can generate high returns for the University over a long period of time.”

While the numbers look positive in that regard, it is important to note how the endowment compares to that of past years even earlier than last year. Vice President for Finance and Administration John Meerts noted that the endowment is still lower than it was before the 2008 recession.

“While these are all positive numbers I would also like to point out that we are basically just back to where we were before the fiscal crisis in terms of, say, our endowment,” Meerts wrote in an email to The Argus. “Yet inflation has chewed away at the real value of the endowment and so we are actually still not caught up. We will need more years of great endowment returns, donor contributions, and fiscal discipline before we should think about things like returning to need blind.”

President Michael Roth attributed part of the endowment increase to efforts over the past several years to cut spending and increase endowment contributions. He also stated that the general upward trend in the stock market and low inflation over the last year could have increased the value of the University’s endowment.

He cited Martin’s influence on investment policies and the success of the “This is Why” campaign as further reasons for this year’s success.

“I think Anne Martin and her crew did a great job, and last year I think we put more money into the endowment than we took out for spending,” Roth said. “That’s part of the ‘This is Why’ campaign—it’s an endowment campaign—and people have been very generous, especially in supporting our financial aid endowment. I love to see that growth, because it’s been our weakness in comparison with our peer institutions.”

The “This is Why” campaign has currently raised $308 million of its overall goal of $400 million. This included cash donations from 46 percent of the University’s alumni, totaling $42 million. Roth and Martin both emphasized the need for continuing conservative investment policies in order for the University to maintain the trend of endowment growth.

Martin also cited University revenue generated from the “This is Why” campaign as being integral to the increase in the University’s endowment, although she said it had little direct impact on her role in determining investment strategies for the University.

To prepare for the possibility of the stock market hitting a low in the coming fiscal year, the University’s investment officers are intent on ensuring that the decrease in the endowment will not be significant enough to severely impact the University’s funding.

Roth stated that there is a trade-off to having a conservative investment policy: if the stock market goes up dramatically in the coming fiscal year, the endowment’s increases will be smaller than if more of the endowment were invested in the market. Martin pointed out that, in recent years, the stock market has been extremely volatile and unpredictable. Thus, she suggests that the investment pool should only target areas that the investment officers think will glean high returns, excluding the equity securities and bonds in which individuals are more likely to invest.

“If we spent all we earned in big years, we wouldn’t have anything on a rainy day,” Martin said. “Investing more conservatively allows more of a payout on rainy days than on sunny days.”

The report also announced that in the next fiscal year, the University will govern endowment spending under a new financial policy called the Tobin Rule. Meerts explained the new policy.

“[It] makes for less volatility in our spending since 70 [percent] of the spending is determined by last years’ spending plus inflation as measured by the Higher Education Prince Inflation index,” Meerts wrote. “So one would expect that spending is less subject to year over year volatility in endowment returns (i.e. market driven) and more accurately reflects our actual spending needs… [I]t should lead to more predictability in our budget and maintain the purchasing power of the endowment.”

The University’s Investment Officers hope that the Tobin Rule will strengthen the endowment, which provides support to a wide range of University operations, including scholarships and professorships. Meerts noted the steps the University can take to continue the endowment’s upward trend.

“[We can] [k]eep up the excellent performance in returns on endowment,… [have] fiscal discipline…[and continue a] successful endowment campaign and continued success in fundraising after this campaign ends,” Meerts wrote. “...I believe that we are moving in the right direction on all three fronts and that the [U]niversity is committed to this long haul goal.”

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