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Tuesday, July 22, 2014

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Princeton endowment earns 21.9 percent return

Princeton University's endowment earned a 21.9 percent annual return on its investments and was valued at $17.1 billion in the fiscal year that ended June 30, 2011. The Princeton University Investment Co. (PRINCO), the University office that manages the University's endowment, will certify the results at its directors meeting on Oct. 20, 2011.

The average annual return on the endowment over the past 10 years is 9.8 percent. This result is in the top percentile of 401 institutions reporting to the Trust Universe Comparison Service.

"The continuing strong performance of the endowment allows the University to sustain its signature commitments to world-class teaching and research and to an unsurpassed financial aid program that ensures all admitted students can afford a Princeton education," Princeton University Provost Christopher Eisgruber said. "PRINCO's excellent results and the budget cuts that the University implemented over the last two years have enabled us to return our endowment spend rate to the University's target band more rapidly than we had anticipated. Nevertheless, the durable effects of the recession on the University and the persistent volatility in the financial markets make it essential that we continue to maintain budget discipline and that we begin to rebuild the financial reserves that enabled us to weather the last downturn."

Eisgruber explained that the University currently has a spending policy that aims for spending between 4 percent and 5.75 percent of the market value of the endowment. In fiscal year 2011 the spend rate was 5.1 percent. The June 30 favorable returns has reduced the spend rate for the current fiscal year, 2012, to 4.4 percent.

Although market volatility has increased since its close, fiscal 2011 represented a period of continuing recovery for the endowment, which is up from a value of $14.4 billion in the fiscal year ending June 30, 2010, when the investment return was 14.7 percent.

During the economic downturn, the University put in place a cost-savings plan that included a reduction of spending of $170 million over two years (the fiscal years ending June 30, 2010 and 2011).

By relying on budget cuts and support from alumni and friends, as well as its reserves, the University was able to continue programs in international study and research collaborations, and protect other key initiatives, including its generous, no-loan financial aid program, Eisgruber said. The University has budgeted $110.5 million this year to provide financial aid to 60 percent of undergraduates in the form of grants that do not have to be repaid.

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