the endowment at washington university

Transcription

1 the endowment at washington university

2 the washington university endowment: an investment in tomorrow Endowment: Making an Extraordinary Difference Endowment gifts and the unceasing support they provide make an extraordinary difference in defining the strengths, quality, and success of Washington University. The cumulative impact of endowed scholarships, endowed professorships, endowed academic and research programs, and endowment for facilities builds guaranteed, permanent support for the work of our faculty and the education of our students. No greater honor is bestowed on a faculty member than an endowed professorship signifying the prestige and recognition she or he has earned as a scholar and teacher. Similarly, a student who becomes an endowed scholarship recipient benefits from a tradition almost as old as Washington University itself: a commitment to constant renewal and growth through enrolling learners of high ability and great promise. For many gifted students and their families who could not otherwise afford college, such scholarships are the critical difference in creating opportunities and access. Endowments make possible breakthroughs in Alzheimer s disease, environmental sustainability, and a number of causes with critical and enduring impact on society around the region, nation, and world. They also generate much-needed continuing income for buildings, classrooms, laboratories, libraries, studios, and academic programs. All such gifts honor in perpetuity the donor, the institution, and those students and families who benefit from the support endowments make possible. Since the Middle Ages, universities have been the most permanent continuing entities in the world. Academic institutions like Washington University persevere while organizations come and go; university endowments are imbued with that same continuity throughout the centuries. An endowed gift lives on and on, providing a vital difference in attracting and retaining talented students and faculty to Washington University. The Campaign for Washington University 1

3 What Is the Endowment? An endowment is a fund that can never be depleted; the principal is held in perpetuity. Unlike current-use gifts, which are spent completely for immediate needs, endowed funds are invested and a portion of the earnings on those investments is spent each year. Washington University s endowment is a collection of nearly 2,900 individual funds that are invested for the long term. Most of the endowment funds have their own sets of restrictions and guidelines as to how they may be used. Some of these endowments are more than a century old and reflect a donor s wishes based on what was known or expected at the time the gift was made. Endowment funds cannot be redirected to purposes contrary to donor instructions. That is why a donor s gift restricted to supporting medical research cannot be repurposed to support undergraduate scholarships. Likewise, a gift clearly intended for an endowed professorship in English literature cannot be spent on need-based grants for undergraduate English majors. At Washington University, the endowment provides the fourth-largest revenue stream, accounting for 10 to 11 percent of annual income in a typical year. Because of its health and biomedical research mission, the university has as its largest source of revenue the School of Medicine s income from patient care and research grants. These are followed by tuition and then endowment spending proceeds. endowment as a percentage of revenue in fiscal year 2012 ENDOWMENT SPENDING: 10% ALL OTHER REVENUE: 90% 2 LEADING Together The Campaign for Washington University 3

4 History of the Endowment Throughout its history, Washington University has been a careful steward of its endowment resources. The endowment has provided vital support for scholarships, professorships, academic programs, research, and health care. One of the earliest gifts to the endowment was made in 1871, when the Western Sanitary Commission, a forerunner to the American Red Cross, contributed $30,000 to endow scholarships. In the 141 years that have followed, more than 700 students have attended the university with the assistance of the Western Sanitary Commission gift. To provide for the future of an organization with such a lifespan, universities must be managed with an eye toward balancing the current requirements of faculty and students with the needs of those who will walk the same pathways and hallways hundreds of years in the future. To do that, it is essential for a university to have a significant endowment a fund (actually, a great number of individual funds) created by gifts. From these funds, only the earnings can be used to support the work of the institution and its faculty and students. Washington University has continued to receive generous support for its endowment from alumni, parents, and friends of the university, and on June 30, 2012, the market value of the endowment was $5.3 billion. Universities exist in perpetuity. From their inception, these are institutions designed to endure. As such, universities take a long view of how they operate and persist over decades and centuries. chancellor mark s. wrighton How Is the Endowment Managed and Invested? The university s Board of Trustees has delegated endowment management to the Washington University Investment Management Company (WUIMC), with fiduciary oversight provided by the WUIMC Board of Directors. WUIMC is led by the chief investment officer who, in conjunction with a professional staff, is responsible for the implementation of investment strategy, selection of investment managers, and all other day-to-day investment responsibilities. The board of WUIMC sets the endowment s investment policy, including the investment return and risk objectives, the strategic asset allocation, and new asset classes. The Asset Management Committee of the Board of Trustees is responsible for the endowment spending policy and the establishment of the annual spending rate. The university s goals are to provide stable support to fund each donor s directed activity in the form of distributions from the endowment, as well as to sustain or grow the real value of the endowment to provide support for future generations in perpetuity. 4 LEADING Together The Campaign for Washington University 5

5 What Are Washington University s Investment Policies? Endowment investment policies are designed to maximize long-term results at an acceptable level of investment risk. Endowed gifts are invested in Washington University s pooled endowment, a globally diversified portfolio of assets including publicly traded stocks and bonds, hedged strategies, private equities, real estate, and natural resources. The endowment s asset allocation the percent exposure to each asset class is shown as of June 30, asset allocation as of june 30, 2012 How Has the Endowment Performed? The diversified nature of the Washington University endowment has helped to protect returns in a market environment that, over the past 10 years, has been characterized by significant volatility. Over this 10-year period, the endowment has produced an annualized return of 6.9 percent, as compared to the 5.3 percent annualized return of the S&P 500 index for the same period. More recently, following two years of strong returns coming out of the financial crisis, the endowment has produced a return of 1.7 percent for the 12 months ending June 30, This single-digit performance reflected alternating risk on/risk off environments during the course of the year that drove the market in strong directions, both on the upside and the downside. PUBLIC REAL ASSETS: 3% PRIVATE REAL ASSETS: 9% PRIVATE EQUITY: 16% HEDGED STRATEGIES: 25% CASH & OTHER: 2% DOMESTIC EQUITY: 15% INTL DEV MARKETS EQUITY: 10% EMERGING MARKETS EQUITY: 10% FIXED INCOME: 5% INFLATION INDEXED BONDS: 5% market value of $1m endowed scholarship established in 1982 ($ in thousands) $ 7,000 $ 6,000 $ 5,000 $ 4,000 $ 3,000 $ 2,000 $ 1,000 $ total endowment values ($ in millions) $ 7,000 $ 6,000 $ 5,000 $ 4,000 $ 3,000 $ 2,000 $ 1,000 $ 0 6 LEADING Together The Campaign for Washington University 7

6 How Much of the Endowment Is Spent Each Year? Washington University s Board of Trustees adopts endowment spending policies that are designed to maintain a smooth spending course over time while making sure that future generations of students and faculty will receive at least the same level of support from the endowment as the current generation enjoys. Over the past decade, total annual endowment spending has increased by more than 50 percent. Trustees who serve on the Asset Management Committee establish an annual rate that will provide a higher level of spending in most years. The annual spending must fall between 3 and 5.5 percent of the five-year average market value of the endowment. An annual average investment return of approximately 8 to 9 percent is needed to achieve a payout rate goal of up to 5 percent and, at the same time, maintain the endowment s value relative to an annual inflation rate of 2.5 to 3.5 percent. The endowment also incurs investment management costs that must be recovered. How Does Washington University s Endowment Compare with Other Institutions? As of June 30, 2011, the endowment ranked 17th in size among the nation s colleges and universities. While the endowment has grown substantially since the founding of Washington University in 1853, future aspirations and the university s ability to thrive will depend greatly on the enduring success of this important asset. top 20 institutions ranked by endowment funds 2011 (in dollars) 1 Harvard University 2 Yale University 3 The University of Texas System 4 Princeton University 5 Stanford University 31, 728, 080, , 374,000, , 148, 649, , 109, 508, , 502, 606, Massachusetts Institute of Technology 9, 712, 628, 000 fiscal year 2012 endowment by purpose 7 University of Michigan 8 Columbia University 7, 834, 751, 733 7, 789, 578, 000 SCHOLARSHIPS: 11% 9 Northwestern University 10 The Texas A&M University System 7, 182, 745, 000 6, 999, 516, 842 PROFESSORSHIPS: 16% SCHOOLS, DEPARTMENTS, PROGRAMS: 53% 11 University of Pennsylvania 12 University of California 6, 582, 029, 227 6, 576, 519, University of Chicago 6, 575, 126, 000 FACILITIES: 20% 14 University of Notre Dame 15 Duke University 6, 259, 598, 000 5, 747, 377, Emory University 5, 400, 366, Washington University in St. Louis 5, 280, 143, Cornell University 5, 059, 406, University of Virginia 4, 760, 514, Rice University 4, 451, 452, 310 Data as of June 30, 2011, according to the 2011 National Association of College and University Business Officers Endowment Study, excluding life income funds. 8 LEADING Together The Campaign for Washington University 9

7 institutions ranked by endowment $ per full-time equivalent student (fte) 1 Princeton University 2 Yale University 3 Harvard University 4 Stanford University 5 Massachusetts Institute of Technology 6 Rice University 7 University of Notre Dame 8 Washington University in St. Louis 9 Duke University 10 Northwestern University 11 Emory University 12 Columbia University 13 University of Pennsylvania 14 Cornell University 15 University of Virginia 16 University of Michigan 17 The University of Texas System 18 The Texas A&M University System 19 University of California Endowment $ per FTE Student 2, 215, 110 1, 667, 728 1, 562, 806 1, 060, , , , , , , , , , , , , , , , 049 How to Make a Gift to the Endowment If you are interested in making a gift to the Washington University endowment, you can contact the Office of Alumni and Development Programs to request additional information, including minimum endowment levels for each type of fund. Endowments can be established to support a variety of areas, including professorships, scholarships, research, and facilities. These gifts can be funded with cash or appreciated securities, or through a planned gift. To learn more about the endowment and how to make a gift, please contact: Office of the Executive Vice Chancellor for Alumni and Development Programs Washington University in St. Louis Campus Box 1101 One Brookings Drive St. Louis, MO (314) david_blasingame@wustl.edu Data as of June 30, 2011, according to the 2011 National Association of College and University Business Officers Endowment Study, excluding life income funds. University of Chicago did not provide data for this report. 10 LEADING Together The Campaign for Washington University 11

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