Endowment sees growth in poor economy

by Madeleine Morgenstern

The University's endowment saw a $41 million growth in the last three months, ending at $1.18 billion as of Sept. 30.

Though the endowment has seen improvement since its 18 percent drop between 2008 and 2009, it still has not returned to its pre-economic downturn level of $1.26 billion.

University administrators said the endowment is doing well despite the wavering economy, plagued by high unemployment levels and an unstable stock market.

"It continues to perform well in a difficult market," Executive Vice President and Treasurer Lou Katz said, adding that GW's endowment performed in the top 5 percent for universities with endowments over $1 billion, according to a report by consulting firm Cambridge Associates.

GW's endowment fared better, and is recovering better, than other universities during the economic downturn. But with the fate of the economy still unknown, the growth may flat line or decrease if foreign markets - in which GW heavily invests - are shaken.

Don Lindsey, the University's chief investment officer, said he is cautiously optimistic about the endowment's growth for the rest of the fiscal year.

"Overall I'm very happy with the growth that we've had in the last quarter," Lindsey said.

Lindsey noted that money markets are still volatile, meaning prices could fluctuate unpredictably and potentially hurt the endowment. The endowment held up well during a negative quarter during the spring, Lindsey said.

"I think that volatility is going to continue to be there, but I think the overall trajectory is going to be positive," Lindsey said.

Lindsey said the endowment continues to perform well outside the U.S., an area the University has focused a large part of its investments in over the past few years.

"If you take a U.S.-centric view, obviously the economy looks pretty bad, but globally, economic growth is pretty solid," Lindsey said.

He said many companies based in the U.S. have seen increasing sales in overseas markets, especially in emerging markets.

"That's helping their profitability and I see that trend continuing for some time," Lindsey said.

Besides emerging markets, Lindsey said the U.S. stock market is also beginning to look good - something that was not seen at all last year given the state of the economy.

"I will say for the first time in a very long time I think the U.S. stock market is very attractive," Lindsey said.

He said investors took a significant amount of money out of the stock market when times were bad and put it into bonds, which are more stable in the long term. When people start to reinvest in the stock market, prices will increase, so those who invest early - while it is still depressed - will see a stronger return.

Lindsey said his major concerns are the depreciating value of the U.S. dollar in areas like China, and the inflation outlook. He said inflation does not appear to be a problem at the moment, but there are signs that say it could be a "significant problem" down the road.

"We're constantly thinking of ways in which we could hedge inflation risk," Lindsey said.

Lindsey agreed this is a better year to hold his position than last year.

"It's a much better environment," he said. "Looking back there's been a tremendous amount that was learned that we can use going forward, and anytime you can survive a down period and learn from it I think that's positive."

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