Nov. 7, 2012

Endowment return positive in FY2012

Edwards

For fiscal year 2012, Cornell's long-term investments (LTI) realized a small positive return in a very volatile economic environment, according to Chief Investment Officer A.J. Edwards.

The increase of .14 percent for fiscal year 2012, which ended June 30, came in spite of the downturn in the markets in the fourth quarter of the fiscal year and is within the performances of the endowments of Cornell's peers, Edwards said.

The total value of Cornell's LTI, as of June 30, was $5.23 billion, down from last year's $5.35 billion, reflecting the annual payout from the endowment exceeding investment gains and endowment gifts during fiscal 2012. Over the last three years, however, the LTI's annual return of 10.6 percent significantly exceeded the payout to the university, helping to increase the ending value of the LTI to $5.2 billion from the low of $4.2 billion at the end of fiscal 2009. The payout to the university, which represents about 11 percent of total university revenues, helps to support university operations as well as financial aid.

Cornell's investments office does not manage the endowment directly; rather, the office seeks to hire best-in-class managers to do so, while the Cornell University Board of Trustees' Investment Committee establishes allocation targets for each asset class and ranges around those targets. The current asset allocation includes U.S., international and emerging markets equities; private equity; enhanced fixed income (distressed investments); hedge funds; natural resource-related investments; real estate; traditional fixed income; and cash.

Over the long term, the rate of return on Cornell's endowment has held a steady course: the university's LTI has increased 10.6 percent over three years, .5 percent over five years and 7.3 percent over 10 years. Seen against the backdrop of inflation, or the Consumer Price Index (CPI) of 2.4 percent over the past 10 years, Cornell's 10-year increase in LTI is nearly 5 percent over the CPI, Edwards said. And this success has been in spite of the 26 percent loss in fiscal 2009 in the wake of the 2008 U.S. financial crisis, Edwards said.

Over 20 years, Cornell's LTI has realized a 9 percent annual rate of return, compared with the 2.5 percent annual growth rate of inflation as measured by the CPI, Edwards said.

Looking ahead, Edwards said, "Our portfolio is well positioned to take advantage of opportunities in Europe and/or the United States as well as across emerging markets and commodity-related sectors."