College endowment hit hard by economy

by Tara Kyle | 10/29/01 6:00am

A harsh year at the stock market caused the return on the College's endowment to fall by 0.4 percent last year and numbers for the first quarter of fiscal year 2002 show a drop of seven percent.

The decline, which is largely due to the struggling economy in the aftermath of Sept. 11, comes after last year's record 46.6 percent positive return on the endowment.

Though the 0.4 percent drop represents the over $2.4 billion endowment's first negative annual take in over 10 years, Dartmouth's Director of Investments Jonathon King said of the 2001 figures, "The fact that we were able to almost come even this year is a really positive thing," adding, "In this market, there's no place to hide."

"It's not cataclysmic, but it will be a significant decrease," he noted.

The seven percent decline for the quarter ending on Septe. 30 is more marked, but not dramatic when compared with widespread market struggles during that period.

During the same period, the NASDAQ dropped by 30.6 percent while the S&P saw a 14.7 percent decline. The Nelland Trust Company's universe of 180 institutional funds, of which the College's endowment is a part, reported an average decline of 7.9 to eight percent.

As to plans for the coming months, King stressed that Dartmouth's strategy is centered on a long term, three to five year outlook.

"We're not really making any dramatic changes," he said, stressing the difficulty in predicting what will happen to the market in coming months, "nobody knows what's going to happen."

"In my mind, the goal is to ride out these times," King said, explaining that gains can be made during periods of healthier market activity.

Dartmouth's long range target is to obtain a return of between 10 and 12 percent, according to King. Despite recent struggles, the College's three year return is still well above that, at 18.5 percent.

The College's targeted breakdown of investments is 70 percent equities (includes NYSE, NASDAQ, international equities, venture capital and hedge funds), 23 percent fixed income and bonds and seven percent real estate.

Venture capital, which was largely responsible for last year's boisterous 47 percent take, fell 20 percent last year, as compared to up 300 percent for fiscal year 2000.

Dartmouth was not alone in seeing a decline in its return.

Harvard's $18 billion endowment fell for the first time in 17 years. After a $4.4 billion rise in fiscal year 2000, figures dropped 2.7 percent last year.

At Cornell, the endowment's value dropped from $3.4 to $3.2 billion.

Despite the troubled economy, Penn and Yale managed to yield six percent increases. For Yale, this brought the school's hefty endowment to $10.1 billion; at Penn the figure came to $3.3 billion at the end of the 2001 fiscal year.

"This is an extraordinary investment performance," President Richard Levin said to The Yale Daily News. "Our returns were much larger in the previous year, but this was a year that tested the very best of investors and the Yale team outperformed virtually all other universities."