It is projected that the College endowment has dropped precipitously since June 30 because of its 48 percent exposure to equity markets, which have been in sharp decline. Although no exact figure has been calculated as to its current value, President Schapiro estimated that the endowment is probably worth around $1.3 billion today, a $500 million, or about a 28 percent drop since the last time it was precisely calculated on June 30.
“If we have $1.4 [billion] now I’d be shocked; it’s probably $1.3 [billion],” Schapiro said, noting that part of this decrease is due to the College’s withdrawls of 80 or 90 million dollars a year, about 5 percent of the endowment, for operational expenses.
“Since [June 30], the market has declined, as have our assets,” said Collette Chilton, chief investment officer. “A good portion of our assets are private investments and are not priced daily, so we don’t have an exact number for the size of the endowment until the end of the fiscal year.”
Equity markets have dropped over 20 percent across the board since June 30. The Dow Jones Industrial Average (DJIA) fell 26 percent while the Nasdaq Composite Index dropped 20 percent. The DJIA and Nasdaq Composite Index measure the stock performance of 30 of the largest domestic companies and over 3,000 common stocks and securities listed on the NASDAQ respectively. “I would guess that benchmarks now are down more than 30 percent and we always outperform, so maybe we’re down 25 [to] 27 [percent],” Schapiro said. “It’s a shocking change of events.”
Despite the drop, Chilton does not plan to make many changes to the College’s investment strategy. “We are long term investors and we are staying the course, managing within the asset allocation policy adopted by the Investment Committee of the Board of Trustees, in order to grow the assets to fund the College over time,” she said.
The endowment is divided among ten asset classes. Forty-eight percent of it composed of global equities, 12 percent in absolute return, 15 percent in private equity and venture capital, 12 percent in real estate and real assets, 12 percent in fixed income and one percent in cash. Despite the drop in equity markets, bonds, small cap value and real estate securities had slightly positive returns for the first quarter.
Chilton is uncertain in what direction the endowment is headed in the future but hopes its diversity of investments will allow for growth. “We don’t forecast how markets perform,” she said. “We have an asset allocation policy set by the Investment Committee that has the endowment diversified across ten asset classes in order to capture the returns of various parts of the market across all cycles.”
In recent history, the endowment has never dropped so significantly in such a short time span. In 2001 and 2002 it fell 8 and 9 percent, respectively. And in 1973 and 1974 it fell 9 and 17 percent, respectively.