Endowment up in shaky economy

Yale’s massive endowment continued to grow in the fiscal year ending June 30, 2001, rising 6 percent from $10.1 billion to $10.7 billion despite treacherous market conditions that chiseled away at other college endowments.

The endowment figures disclosed by Yale’s Investment Office Tuesday represented another victory for the University’s investment gurus, who have guided Yale’s holdings to an average annual return of 18.3 percent in the last decade.

The endowment’s investments returned 9.2 percent during the fiscal year, and Yale spent $338 million of endowment money, bringing the net rise in value to 6 percent.

While the latest success pales in comparison to the nearly unparalleled 41 percent yield in 1999-00, the solid performance stands out from the turbulent economy.

“This is an extraordinary investment performance,” Yale President Richard Levin said. “Our returns were much larger in the previous year, but this was a year that tested the very best of investors and the Yale team outperformed virtually all other universities.”

The Dow Jones Industrial Average was flat and the Nasdaq index lost nearly half of its value between June 30, 2000, and June 30, 2001, the period covered by the new endowment figures.

In the last decade, Yale’s endowment has quadrupled, dumping hundreds of millions of dollars into academic programs and other initiatives.

Yale’s insulation from the vagaries of public securities markets has been the primary reason for University’s endowment success in recent years. Yale instead invests the vast majority of its money in private equity, fixed income or absolute return strategies.

Administrators warn, however, that continued economic instability, especially sharp market declines like those in the last week, will inevitably affect the University’s holdings and endowment performance in the current fiscal year.

“It’s too soon to make a call, but it’s definitely on everyone’s minds,” Richard said.

Harvard and Princeton have not released new figures for 2000-01 yet, but Yale administrators seem confident the University has once again bested its rivals’ returns.

“I know of no other school that has managed to do better in the same period,” said Provost Alison Richard, Yale’s chief academic and financial officer.

Yale’s endowment is the nation’s second largest. Harvard, with $19.2 billion, has the largest endowment and will announce new totals today.

It has been widely speculated that the average college endowment lost value in fiscal year 2001. Mid-year reports from 20 of America’s wealthiest universities in December showed returns ranging from 3 percent losses to 5 percent gains.

Even though significant endowment growth in the current fiscal year is unlikely, officials are confident that the University’s investment team, led by Chief Investment Officer David Swensen, will make the most out of a bad situation.

“[Swensen] is more proud of this year’s 9 percent than last year’s 41 percent,” Richard said. “He should be — they did an outstanding job.”

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