Alternative strategy fed endowment growth



While Yale’s endowment increased by nearly 5 percent this year, largely the result of alternative investment stategies that play down the role of traditional equities, other Ivy League schools reported mixed results this fall.

Despite the stagnant American economy, Yale recorded an all-time high as its endowment grew to $11 billion during the 2002-03 fiscal year, reversing last year’s slight decline. The increase was a result of using investment strategies that placed less emphasis on stocks and bonds, Yale School of Management professor William Goetzmann said. Meanwhile, the University of Pennsylvania and Brown University also saw increases in their endowments, while Princeton University and Dartmouth College experienced decreases this year. The Massachusetts Institute of Technology has not yet released its endowment figures, but announced that it would cut next year’s operating budget by $70 million.

Yale School of Management professor Roger Ibbotson said Yale’s endowment does not closely follow the overall equity market, which means that it was better equipped to weather the economic downturn. Goetzmann said other schools have started following Yale’s innovative investment strategies, and attributed much of the success to Yale’s Chief Investment Officer David Swensen — an expert in alternative investments.

“A few years ago, other schools saw the success of Yale and started to imitate Yale’s strategy,” he said. “The larger schools tended to do this extended diversification into smaller investments. The smaller schools didn’t do it as quickly.”

Last year, Yale’s endowment stood at $10.5 billion, falling from $10.7 billion in 2000-01.

Brown’s endowment grew 3.34 percent from $1.436 billion to $1.484 billion as of June 30, said Brown spokesman Mark Nickel. This reversed a loss for Brown during the 2001-02 fiscal year, in which it lost about $20 million.

The University of Pennsylvania also saw its endowment grow, reaching $3.5 billion for a 4.7 percent increase. Penn’s Treasurer and Vice President for Finance Craig Carnaroli attributed Penn’s growth to alternative investment strategies as well, the Daily Pennsylvanian reported.

And although Harvard declined to reveal its endowment numbers, Yale Corporation Member Len Baker ’64 said he heard Harvard’s endowment grew by a larger percentage than Yale’s this year.

Other schools reported less auspicious news.

MIT now faces serious repercussions because of decreases in its endowment. In addition to cutting its operating budget by $70 million next year, top administrators told the Associated Press that the school would also have to cut approximately 200 jobs. During the 2001-02 fiscal year, MIT experienced a 17 percent drop in its endowment, bringing it to $5.4 billion. MIT Provost Robert Brown did not return repeated phone calls on Wednesday.

Princeton University spokesman Eric Quinones said the school’s endowment was $7.9 billion as of March 31, down 5 percent from last year’s figure of $8.3 billion. This represents the second consecutive decline in value, after it fell half a percent from $8.35 billion in 2000-01.

Dartmouth, which instituted major budget cuts last year because of a 5.7 percent drop in its endowment, is down again, to $2.1 billion this year, Director of Investments Jonathon King said. He said the decrease is a result of changes in the endowment spending distribution.

Columbia University declined to reveal statistics on its endowment for the current fiscal year. Last year, the net value of Columbia’s endowment was $4.238 billion, which represented an $85.6 million decrease from 2000-01.

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