Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Endowment Keeps Climbing

In line with the national trend, Georgetown’s endowment posted strong growth in fiscal year 2013, driven in part by improved returns on investment and the $100 million donation from Frank McCourt Jr. (CAS ’75).

Georgetown’s combined endowment had an 11.8 percent annual return on investments for fiscal year 2013, a marked improvement from fiscal year 2012’s 0.9 percent return, according to the Office of Investment, which manages the pooled endowment’s day-to-day operations, including asset allocation and portfolio management.

“The pooled endowment benefitted throughout fiscal year 2013 from an increase in its allocation to global equity and a tactical overweight to U.S. equities,” a representative from the Office of Investment said. “Throughout the year, we rebalanced into other developed markets as well, with an emphasis on Japan, and added selectively to our emerging markets exposure.”

Nationally, college endowments averaged an 11.7 percent return in 2013, up from a 0.3 percent loss in 2012, according to preliminary figures from a survey of 461 U.S. colleges jointly compiled by the Commonfund Institute and the National Association of College and University Business Officers. The full survey will be released in January and is expected to include more than 800 public and private educational institutions in North America.

According to the investment office, the improved growth can also be attributed to record low interest rates, reducing the risk to the university’s portfolio.

The strong performance in 2013 continues a long-term trend of success for Georgetown’s investment returns.

Over the last 10 years, the pooled endowment has generated an average of a 7.8 percent investment return annually, outpacing the national average of both a domestic equities portfolio and a passive 70 percent equities and 30 percent fixed income securities portfolio. The pooled endowment achieved this return with about half the volatility and risk involved in global equities.

According to the investment office, Georgetown pursues a mix of investment assets in order to reduce its risk while still producing as high of an expected return as possible. More specifically, the office’s target asset allocation is currently 50 percent equity, which includes stocks, 20 percent absolute return, which includes hedge funds and alternative investments, 15 percent real assets, which includes property and 15 percent fixed income.

Nationally, the growth this past year was largely attributed to a strong equities market fuelled by quantitative easing, whereby the Federal Reserve purchases long-term assets from commercial institutions to increase a country’s monetary base, along with additional forms of support from the Federal Reserve and the European Central Bank. In line with the national trend, Georgetown has shifted to a higher proportion of equities in its portfolio recently.

“Most endowments are heavily tilted to equities and alternative investments seeking equity-like returns,” Douglas said. “As a result, returns will generally move in the same direction as equity markets in any given year, albeit to a lesser degree due to diversification into other asset classes like fixed income and commodities.”

The performance of the endowment, and thus the investment returns, is crucial for the university, according to the Investment Office.
“Georgetown’s endowment lends fiscal stability to the university and provides critical resources which enable the university to offer competitive tuition, support high-quality academic programs, attract top faculty and ensure that the brightest students have access to a Georgetown education,” the office stated.

Georgetown’s endowment, however, has been historically small, but recent charitable gifts have helped it grow, largely due to the Campaign for Georgetown.

The capital campaign was already set to pass its yearly target of $151 million before McCourt’s $100 million donation. The donation has pushed the campaign to increase its goal for this year to $225 million to reflect the university’s 225th anniversary, according to Vice President for Advancement R. Bartley Moore (SFS ’87).

“Now that’s going to be a bit more of a stretch,” Moore said. “But goals aren’t supposed to be easy.”

According to Moore, about 40 percent of donations to the campaign go toward the endowment.

“This is higher than the historic average both at Georgetown and in higher education fundraising generally, where it tends to be about 30 percent,” he said. “This reflects our ambition to accelerate steady growth in the endowment not only through sound investment but through increasing new contributions annually. That is the permanent foundation on which we are building the future of the university.”

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