Princeton endowment earns 14.7 percent return

Princeton University's endowment earned a 14.7 percent annual return on its investments in the fiscal year that ended June 30, 2010. The Princeton University Investment Co. (PRINCO), which manages the University's endowment, will certify the results at its meeting Thursday, Oct. 21.

"The strong performance of the endowment contributes significantly to the financial health of the University in what remains a difficult economic climate," said Princeton University Provost Christopher Eisgruber. "As a result of PRINCO's excellent stewardship of the endowment, the support of the University's alumni and friends, and the budget cuts implemented by units throughout our campus, Princeton has established a new baseline for its budget and avoided the need for additional reductions in spending. The endowment's performance brings us back within our target band for spending, but we will need to demonstrate continuing budget discipline to contend with the effects of the recent financial crisis and persistent economic uncertainty."

As of June 30, 2010, Princeton's endowment was valued at $14.4 billion. At the end of the previous fiscal year, the endowment stood at $12.6 billion, following an investment return for that year of -23.5 percent. The return for the 2008 fiscal year was 5.6 percent.

During the economic downturn, the University reduced spending by $170 million over two years -- for the previous fiscal year 2010 and the current 2011 year -- but sustained its commitment to world-class teaching and research. The University also protected key programmatic initiatives, such as its generous financial aid program and family-friendly benefits for faculty, staff and students. This year, a budget of more than $109 million for Princeton's "no-loan" program provides financial aid to roughly 60 percent of undergraduates in the form of grants that do not have to be repaid.

The University's long-term annualized endowment returns remain strong. The average annual return on the endowment over the past 10 years is 7.9 percent. This result is in the top percentile of 428 institutions reporting to the Trust Universe Comparison Service.

In asserting that the endowment's positive performance for 2010 should place the University's spend rate back within its target band, 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. Last year, the spending rate was 6.04 percent, modestly above the upper level of the policy. This year's favorable returns will reduce the spend rate to 5.1 percent.