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University endowment generates first loss since Great Recession in 2008

PRINCO headquarters
22 Chambers Street, the building that houses PRINCO.
Ben Ball / The Daily Princetonian

The University endowment stands at a value of $35.8 billion for the fiscal year of 2022, according to an announcement on Friday, Oct. 27 from the Office of Communications. This year’s endowment demonstrates a decrease of $1.9 billion compared to last year’s $37.7 billion endowment. 

University investments generated a loss of 1.5 percent, the lowest investment return since the Great Recession of 2008. That year, the University investments suffered a loss of 23.5 percent. This year’s decrease comes after last year’s 46.9 percent investment return

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In a Daily Princetonian interview with Andy Golden, president of the Princeton University Investment Company (PRINCO), reports, “This is a minor loss, particularly on the backs of a very large return last year that we are still working through strategic planning for how to best spend that increase.”

PRINCO is charged with investing the University’s endowment. 

Golden cited challenging market conditions as the reason for the University’s dramatic investment loss compared to last year.

“There’s a lot of factors in play while the difficult environments may continue for quite some time,” he told the ‘Prince.’ “Whether or not we’ll be able to outperform markets as well as we have in the past remains to be seen. It’s never guaranteed.”

The S&P 500, the stock market index measuring the performance of 500 large companies, indicated losses in 2022. Beginning in June 2021, the S&P 500 steadily rose to about 4,600, before dropping to less than 4,000 in June of this year.

Nearly all of the Ivy League schools similarly reported decreases in endowment returns. 

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During the last fiscal year of 2020–21, Princeton’s total endowment was the third largest in the Ivy League, with Harvard and Yale each holding endowments over $40 billion. 

This year, the University’s endowment remains the third-largest in the Ivy League, despite its investment loss. 

Columbia saw the largest investment loss, with a 7.6 percent decrease in returns compared to its previous year’s 32.5 percent investment return. Brown and Dartmouth came in second and third, with investment losses of 4.6 percent and 3.1 percent, respectively. Harvard and Cornell University also reported losses of 1.8 percent and 1.3 percent respectively. The University of Pennsylvania and Yale were the only schools that did not report investment losses — Penn had a 0.0 percent investment return, and Yale had a 0.8 percent investment return. 

For the fiscal year of 2022, endowment distributions to the University’s operating costs totaled at $1.5 billion. 

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This comes after the University’s fall commitment to expand the financial aid program by eliminating the student contribution and providing full financial aid for families making less than $100,000 annually, beginning in Fall 2023. 

“Endowment funds cover over 80% of the undergraduate financial aid budget,” the University announcement states. 

Golden added to the ‘Prince,’ “Ramping up a lot in the fall, we’re thinking a little more short-term and put on a very large quantity of market hedges, which is a good reason why the damage was less than it otherwise would have been.”

Vice President for Finance and Treasurer Jim Matteo reaffirmed the University’s commitment to its investment strategy. 

“The challenging market environment in the past year reinforces the University’s long-term investment strategy: long-term investments that lead to long-term results that support long-term goals,” he said in the announcement.

Correction: A previous version of this article reported the S&P500 in dollar terms. The ‘Prince’ regrets this error.

Janny Eng is a news staff writer and finance beat writer for the ‘Prince.’ Please direct any corrections requests to corrections@dailyprincetonian.com.

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