GW endowment drops 18 percent

GW’s endowment lost nearly $250 million over the last fiscal year, an 18 percent drop, but University administrators maintain that GW is one of the lucky ones in higher education.

The average loss for university endowments was 23 percent, according to a report released by the National Association of College and University Business Officers in January. The endowment, which dipped below $1 billion this summer, stood at $1.008 billion on June 30, when the fiscal year ended, Executive Vice President and Treasurer Lou Katz said last week.

“We think it was a very good performance,” Katz said of the University’s endowment. “Obviously you would always prefer to have a zero drop, but relative to what the market was doing during that same period of time, the benchmark for global stocks was down over 29 percent.”

Katz will present the final, audited figures to the Board of Trustees on Oct. 16.

Don Lindsey, the University’s chief investment officer, said GW did not experience many of the problems that other universities did due to financial strategies implemented both before the financial crisis began and after the market began to decline.

Lindsey said GW benefited from being different than many universities who rely heavily on alumni donations. Those universities found themselves with no cash on hand when the market bottomed out, forcing them to sell their stock at low prices and causing significant losses in their endowments over a short period of time, he said.

Lindsey added that other institutions invested in funds that lost all of their worth when Bernie Madoff’s Ponzi scheme imploded in December.

“We didn’t have any real significant problems, other than just the general downturn in the market,” Lindsey said.

While Lindsey said it is hard to tell how long it will take for the market to rebound and the endowment to reach its previous high of $1.256 billion, he said he does not think it will happen overnight.

“My belief is that growth in U.S. will be very slow and that market is going to be very volatile,” Lindsey said. “We see the most opportunity outside of the U.S., particularly in southeast Asia and Latin America. So what we’re doing, while still trying to manage risk carefully, is looking outside U.S. in other growth opportunities.”

Lindsey said GW is able to invest in these markets because the University relies on tuition for the majority of the operating budget, rather than the endowment like many universities across the county. That leaves the other institutions with less flexibility in their investment strategies.

“We have an endowment that really is not a checkbook for today, but a resource for tomorrow,” he said.

Despite the major losses in the endowment, Lindsey said he sees a lot of opportunity in the current economic environment, and is positive that GW will come back from these setbacks.

“I see this as the best time to be CIO because I see more opportunities today than I’ve seen in 10 years,” Lindsey said. “Those opportunities are going to be very positive for us. I’m excited about these opportunities. We have more ideas than we have cash to put to work. Ideas that will provide strong returns.”

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