GW’s net investment earnings down nearly 100 percent

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The net amount GW gained in investments last fiscal year is about $137 million less than in the previous fiscal year, according to newly released financial documents.

The 98 percent decrease in fiscal year 2015 comes after GW earned $140 million from the investments in the previous fiscal year, according to financial documents released at last month’s Board of Trustees meeting. University spokeswoman Maralee Csellar said the decrease occurred because of a weaker financial market.

“Industry-wide markets performed significantly better in FY14 than in FY15, and many endowments experienced a decline between the two years,” Csellar said in an email.

GW’s $1.57 billion endowment grew about 2 percent during that time period, a 12 percentage point decline from its gains in fiscal year 2014. Healthy markets buoyed investments that year, marking the first time in three fiscal years that the fund – which officials use for scholarships and construction costs – saw double digit growth.

In total, the University earned about $2.5 million in investments last fiscal year – a figure starkly different from the $124 million and $84 million investment gains in the previous two fiscal years.

Richard Vedder, the director of the Center for College Affordability and Productivity, said the University should be taking note of how to improve next year’s investment revenue.

“It looks to me like GW probably had a pretty bad year in investments,” he said. “This is a big item, though. This is where you should focus a lot of your effort.”

But he said fiscal year 2015, which ended in June, was rough for some institutions, and many universities saw their endowments shrink.

“That’s not necessarily a smoking gun,” he said.

Over the last five years, GW’s endowment has grown by nearly half a billion dollars, allowing officials to fund high-priority areas like construction, faculty hiring and scholarships. Officials outsourced the management of the endowment in 2014, and it is now managed by Arlington, Va.-based Strategic Investment Group.

Anthony Yezer, a professor of economics, said other universities, like Yale University, saw multi-billion dollar drops in their endowments. But GW’s investment in real estate – which makes up about 40 percent of its endowment portfolio – can help keep the University’s endowment steady.

The University earned about $102 million from property rent and an increased value of real estate last fiscal year, down nearly 50 percent from the previous fiscal year, according to financial documents. Rent from GW’s tenants remained steady, but the University’s real estate holdings earned about half what it earned in the previous fiscal year.

“And we have a lot of real estate also, but longer term, having an endowment in D.C. real estate is not a bad idea,” Yezer said. “D.C. is a little bit special.”

GW currently owns high-profile real estate in Foggy Bottom, including the Washington Circle Hotel and the 2000 Pennsylvania Avenue complex.

Yezer added that officials should be sure to invest in multiple areas to keep their endowment healthy.

“I’d just advise them to be well-diversified, not to do anything special,” Yezer said. “Other than having a little more D.C. real estate because we want to control the area around campus, we should do what everyone else does.”

The contents of GW’s endowment are not public, but Yezer said GW tends to hold more real estate than other institutions, which can give it an edge in the long term as real estate values rise over time.

Economics professor Donald Parsons, who is a member of the Faculty Senate’s finance committee, said part of the reason for low investment income comes from a declining stock market. The S&P 500, a stock market index, increased about 7 percent last fiscal year, a steep drop from the 22 percent increase the previous fiscal year.

Parsons added that the stock market has a large influence on investments, and can cause great fluctuations when the amount invested is large.

“It could be that volatile,” he said. “It doesn’t take much if you’re talking about investment portfolios.”

Vaidehi Patel contributed reporting.

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