Endowment sees $50 million dip

The University’s endowment took a $50 million hit since the start of this fiscal year.

Executive Vice President and Treasurer Lou Katz attributed the 3.8 percent drop to “a broad decline of prices in global stock markets” during the first six months of fiscal year 2012. The endowment now stands at about $1.25 billion.

About half the endowment is comprised of foreign assets, the largest chunk of which is concentrated in Brazil’s emerging economy. The other half of the endowment, made up of domestic investments, saw a smaller decline in value.

Despite a dip in overall market value, the endowment produced a $29.6 million payout to GW – through gains and interest on investments – between the start of the fiscal year in July and January, the most recent data available, Katz said. The amount is part of the about $60 million the University annually spends on operating costs and expansion.

Katz said he was not concerned about the market decline in the second half of 2011, as it allowed the University to buy additional stock holdings at lower prices.

“This strategy has paid off handsomely so far in 2012 as global stock markets have rebounded significantly year-to-date,” Katz said.

Katz’s investment approach falls in line with his strategy to borrow money when interest rates are lowest, not when the University needs to fund a large project, explaining why GW’s debt saw no major spike in the lead-up to the October groundbreaking of the $275-million Science and Engineering Hall.

Earnings generated by endowment investments fund student financial aid, professorships, fellowships and on-campus building projects.

During last fiscal year, the endowment reached its highest total in University history after climbing $160 million – an upward trend that Chief Investment Officer Don Lindsey in September linked to strong equity markets.

The year before, its market value grew by $135 million.

“We’re pleased with where we are,” Katz said. “If you look at it over a three to five year period, we’re one of the top performing endowments in the country continually.”

The Wall Street Journal reported last week that most college endowments saw “healthy returns” during the 2011 fiscal year, but made no prediction for the upcoming financial period. In the past two years, GW mirrored a nationwide trend of back-to-back annual growth.

The Board of Trustees is responsible for determining how endowment funds are distributed each year.

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