The University endowment went from $13 billion to $15.8 billion during the past year, Princeton University Investment Company (PRINCO) President Andrew Golden said in an interview yesterday.
The endowment's investment return for the 2006-07 fiscal year was 24.7 percent, which marks an increase over last year's 19.5 percent. For the 2005-06 fiscal year the national average for higher education endowment returns was 10.7 percent, according to the National Association of College and University Business Officers (NACUBO). The average percentage increase for the 2006-07 fiscal year, which ended June 30, has not been released.
"This was an amazing year," Golden said of the endowment growth and investment return. "We've done very well versus market benchmarks."
Yale saw a record 28 percent increase this year, which brought its endowment to $22.5 billion. Harvard and Stanford both reported returns of 23 percent, ending the fiscal year with endowments of $34.9 billion and $17.2 billion, respectively. MIT ended the year with an endowment totaling $9.98 billion and an investment return of 22.1 percent. All of these figures are accurate as of June 30, when most universities calculate endowment statistics for the previous year.
Princeton's endowment is the fifth largest in the country, behind Harvard, Yale, Stanford and the University of Texas system.
In 2006, Princeton's per-student endowment was $1,910,501 which was the highest per-student value of any undergraduate institution in the country, according to the Chronicle of Higher Education. Yale ranks second with $1,589,159 per student and the Franklin W. Olin College of Engineering is third.
PRINCO, which manages and invests the University's endowment, focuses mainly on its longterm performance. The University's endowment's average gain over the past 10 years has been 16.2 percent. "In that respect, I think we've outperformed all but a few schools," Golden said. Yale has had an average return of 17.8 percent over the past 10 years, while Harvard averaged 15 percent.
Golden said three factors affect the endowment's fluctuation: investment return; asset inflow in the form of gifts to the endowment; and asset outflow when the University spends money from the endowment.
The University's spending from the endowment this year was greater than the total of money donated to it.
"The purpose for having the endowment is to spend it," Golden said, adding that it is normal for the endowment's asset outflow to be greater than its asset inflow.
The University recently submitted a statement to the Senate Finance Committee detailing its endowment spending in response to a proposal that universities should be required to spend at least 5 percent of their endowment each year.
"We spend close to 5 percent, but it's not possible to spend that every year and still ensure that the endowment will be strong for future generations of Princetonians," Golden said.
"Princeton puts a lot of care and thought into its framework for spending, and we're spending as much as we should be," Golden said of the Senate proposal. "Our endowment spending makes up more than 40 percent of the operating budget, so our primary goal has to be sustaining its value for future generations."
Currently, the University spends about 4.6 percent of its endowment each year, which is as much as it can spend and still preserve the longterm value of the endowment, Golden said. He added that Princeton's longterm goal is to be able to spend 5 percent of its endowment without weakening the value for future years.
In 1979 the University adopted a target spending range of between 4 and 5.75 percent of its endowment.
During the 2006-07 fiscal year, several indexes increased substantially, contributing to the University endowment's strong investment return. The markets were "more challenging" in July, however, right after the fiscal year ended. "Our numbers have held up [since June 30]; we have not lost money," Golden said.
In August, Harvard Management Company president and CEO Mohamed El-Erian announced that Harvard lost $350 million during July 2007, marking a 1 percent decrease in its endowment.
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