Investments see large gain

The University’s endowment earned a 19.4 percent return in the fiscal year ending June 30, 2004, bringing its total value to $12.7 billion, University President Richard Levin said Tuesday.

Yale’s rate of return is the second highest in the Ivy League, though Columbia University has yet to report its returns. The endowment gained markedly from last year, more than doubling the 8.8 percent return it saw in 2003, when the endowment’s total value was $11 billion. Levin said the endowment netted approximately $2.1 billion in gains this year.

“The figures speak for themselves. This is an extremely good performance,” Levin said. “Over a multi-year period, the returns are extraordinary, nothing less than phenomenal.”

In light of the gains made in the past fiscal year, the Yale Corporation approved at its meeting this weekend an increase in the endowment spending cap from five percent to 5.25 percent, Levin said. The University expects spending from the endowment to total about $562 million this year, an 11 percent increase from the previous fiscal year, Levin said. The increase marks the first time in nine years that the targeted rate of endowment spending has changed.

Vice President for Finance and Administration John Pepper said the increase in the endowment spending cap is an important step towards eliminating Yale’s projected $15 million budget deficit while continuing its building renovation programs.

“It’s extraordinarily valuable to have it in a time where we have a tight budget,” Pepper said. “At the same time, there’s a strong effort on the part of the University to fully fund the replacement of buildings and so forth. Yale is taking a very forward-looking position to make sure we have the money to continue these programs over time.”

Pepper said the endowment returns will be instrumental in long-term residential and academic construction programs.

“We’re doing what many other universities aren’t doing, which is investing for the future,” Pepper said.

Diversifying Yale’s investment portfolio also factored into the spending cap increase, as did the rise in utility costs and salaries for faculty and management and professional employees, Levin said. He said the higher costs would likely cancel out most of increased funds available for spending.

Pepper praised the long-term results delivered by the University’s investment team, led by University Chief Investment Officer David Swensen.

“Frankly, Yale is the envy of the university world,” Pepper said. “This is a strong year for many universities, but what matters is the long term. In the last five, or even ten years, we have been the best.”

Harvard performed best among Ivy League institutions this year, yielding an endowment return of 21.1 percent and bringing its market value to $22.6 billion, maintaining its status as the nation’s largest college endowment, Harvard Management Company President Jack Meyer announced in September.

Behind Harvard and Yale, Dartmouth College showed the most strength, posting endowment returns of 18.6 percent, a marked increase from a 2 percent return last year and bringing its total market value to $2.45 billion, Dartmouth officials announced two weeks ago. The University of Pennsylvania, Princeton, Brown and Cornell universities ranked fourth through seventh, respectively.

Columbia has not yet released its figures from the past fiscal year. Last year, Columbia netted a 5.3 percent endowment return that brought the market value of its endowment to $4.3 billion, Columbia spokeswoman Susan Brown said Tuesday.

Levin said Yale is comfortable with its position in the Ivy League financial standings, but still sees room for improvement.

“We beat the benchmarks in every class,” Levin said. “[But] we aim to be number one.”

Levin said he expects Yale’s endowment returns to bolster support for next year’s budget.

At $12.7 billion, the endowment makes up approximately 32 percent of the University’s revenue, more than doubling its contributions to the operating budget it provided a decade ago when the endowment had a total value of $3.6 billion. Thanks to strong endowment returns over the past decade, Yale ranks in the top one percent of institutional funds.

No caption.
Zoe Pershing-Foley
No caption.

Comments