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In the year
ending March 31, 2005, Wesleyan's endowment has performed in the top
quartile of schools with similar-sized portfolios, according to data
collected by the Office of Finance and Administration. Wesleyan’s return of
11.7 percent was not only 2.2 percentage points above the 25th
percentile for peer schools, it was almost twice the S&P 500 return for the
same period.
These results
reflect a series of improvements in Wesleyan's portfolio management,
according to Vice President for Finance and Administration Marcia Bromberg.
In 1997 the university developed new endowment
guidelines that divided the activities of the Wesleyan Board of Trustees'
Portfolio Subcommittee, into asset-class working groups. The Board engaged
alumni who are experts in the various asset class fields—such as marketable
equities, fixed income, private equity and hedge funds—to participate in
choosing and reviewing managers and finding investment opportunities.
Wesleyan hired a professional director of investments, Tom Kannam, to work
with the Portfolio Subcommittee to identify, vet and monitor manager
results. Kannam has provided data and detailed analysis that allow the
Portfolio Subcommittee to better assess asset allocation decisions and
identify segments of the market ripe for investment opportunities.
Wesleyan's new
strategic plan recognizes the importance of adding new gifts to the
endowment. The university has set an annual goal of new gifts equal to 1.5
percent of beginning endowment value. That goal will increase over the next
several years to 3 percent of beginning endowment value.
While
Wesleyan's endowment lags those of competitors among the elite liberal arts
colleges, the reason has never been investment performance, according to
Bromberg. To understand why the university's endowment fell relative to this
group since the early 1980s, Bromberg's staff compared Wesleyan's endowment
over a 15-year period (1983-1998) with six of its strongest peer liberal
arts colleges. Wesleyan began the period with the second-largest endowment
and ended with the smallest. Reviewing investment results, endowment
spending formulas and new gifts to the endowment, it became clear that
Wesleyan's average to above-average investment performance was not the
reason the endowment lost ground. Nor was spending, although the university
spent marginally more than its peers. The key to the relative decline was
that the other schools added significant new gifts to their endowments
during this period and Wesleyan did not.
The recent success of the
university's fund-raising efforts, as evidenced by the $281 million Wesleyan
Campaign, and the commitment to building the endowment through new gifts
will be crucial to strengthening Wesleyan's relative financial position,
according to Bromberg. Improved investment performance will both maximize
the leverage of gifts to the endowment and increase donor confidence in
Wesleyan, she said. |
