Thanks to careful management and generally favorable market conditions, Cornell’s long-term investments (LTI), which include the university’s portfolio of endowments, significantly increased in value in fiscal year 2014.
Don Opatrny, chair of the Investment Committee, and A.J. Edwards, the university’s chief investment officer, reported the results to the Cornell Board of Trustees Oct. 18, during the Trustee-Council Annual Meeting.
Investment gains totaled $880 million, and gifts into the LTI reached $139 million. There was a $533.6 million net increase in the value of the LTI at the end of fiscal year 2014, a 15.8 percent return, bringing the total value to $6.2 billion, compared with $5.7 billion at the close of fiscal 2013.
The payout to the university was $311.1 million, compared with $288.9 million in fiscal 2013. The payout, which contributes about 10 percent of total university revenues, supports operations and student financial aid.
The LTI has surpassed where it stood in fiscal year 2008, when it reached $6 billion. “Investment gains combined with the generous giving of our donors helped bring the LTI’s total to $6.2 billion today,” said Edwards. The investment gains since fiscal year 2009 are double in size compared to the loss during the downturn, Edwards noted.
The LTI has returned 11.7 percent annualized over five years and 8.2 percent over 10 years, as seen against the backdrop of inflation as measured by the Consumer Price Index, which has grown at a 2.5 percent annual rate over the past 10 years.
For fiscal year 2014, the largest returns came from private equity, domestic equity and non-U.S. developed portfolios. Assets also include enhanced fixed income (distressed investments), resource-related investments, real estate, traditional fixed income (bonds), hedge funds and cash. Edwards employs a team of asset-class managers with expertise in each area and, he said, draws heavily on the expertise of Investment Committee members. Over the past year, the Investment Office and the Investment Committee reviewed the LTI’s positions in Europe and emerging markets and began a full asset allocation review, which will conclude later this year.
Although shifts in the world economy – particularly in Europe – need to be watched, Edwards said, recent ups and downs of the market are not a major concern. “We … have resisted increasing the overall equity exposure in the LTI simply to chase markets higher,” the report concluded. “The LTI is positioned both to weather the continued uncertain and ever-changing economic outlook and to benefit from opportunities that may arise from time to time … to comfortably meet the projected needs of the university while taking advantage of our long-term investment horizon.