University News

Endowment falls to $3.2 billion from record high

Annual return within top quartile of 144 peer institutions, top half of Ivy League despite losses

By
Senior Staff Writer
Wednesday, October 5, 2016

The University’s endowment fell by 1.1 percent to $3.2 billion over the 2016 fiscal year, according to a University press release.

This is a marked departure from the previous fiscal year, when the endowment reached a record high of $3.3 billion after a 5.7 percent return, as The Herald previously reported.

“The opportunity set this year was very narrow, and it was a challenging environment,” wrote Managing Director Jane Dietze in an email to The Herald. “We did a good job of protecting capital.”

Global markets were weaker than in the previous year, as the S&P 500 posted a gain of just 4 percent in comparison to 7.4 percent last year.

The University invested 24 percent of the endowment in public equity, 20 percent in private equity, 5 percent in real assets, 7 percent in fixed-income instruments and 7 percent in cash, according to a release from the Investments Office.

“The only bright spots in terms of performance were bonds, gold and global real estate,” the release stated.

A loss of 1.1 percent still means that the University beat its aggregate benchmark of -2.2 percent. The number represents the point-of-reference expected returns for each asset class weighted by their share of the University’s investments.

“Beating the benchmark suggests that our active management adds value,” Dietze wrote.

That percentage loss also places Brown in the top quartile of 144 peer institutions by endowment returns as defined by Cambridge Associates, according to the Investments Office release.

The University’s returns also exceeded those of half of its Ivy League peers. While Yale and Princeton earned returns of 3.4 percent and 0.7 percent on their respective funds, Harvard and Cornell lost 2 percent and 3.3 percent of their respective endowments.

“It’s a long-term race, and we have been laying the foundation to be highly competitive during the last three years,” Dietze wrote of Brown’s performance relative to its Ivy League peers. “We want to be highly competitive, but only with a high-quality return and doing what is right for Brown in terms of risk and liquidity.”

Between 4.5 percent and 5.5 percent of the endowment’s value is contributed annually to the University. The endowment funded 18 percent of the University’s operating budget this year, distributing $166 million, or $18,500 per student, according to the Investments Office release. Thirty-one percent of the endowment goes to scholarships and fellowships, 20 percent to professorships, 4 percent to libraries, 6 percent to instructional programs, 16 percent to general academic support and 23 percent is not earmarked for any specific purpose.