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The Carletonian

The Carletonian

Carleton’s Endowment Tops $700 Million

<rleton is $55 million richer.  The school’s endowment increased by 8.5%, from $645.7 million to $700.5 million from June of 2012 through June of 2013.

“We do not have expectations for performance in any one year, but this return is above long-term expectations,” said Chief Investment Officer Jason B. Matz, whose department is charged with managing the endowment.

Indeed, gifts and investment returns actually totaled nearly $88 million, although this was offset by the school’s spending $32.8 million of the endowment’s principal. 

$13.9 million, or 16%, of the increase came directly from donations by alumni, parents, and friends of the college, according to Gayle McJunkin, the school’s Vice President for External Relations.  Five individual donors, each of whom gave at least $1 million, were responsible for well over a third of this sum.

Though some gifts were given with no strings attached, a hefty proportion of funds contributed were given specifically to fund certain programs including student financial aid, internship grants, and Academic and Civic Engagment program, according to McJunkin.  Many donors gave funds to be used for initiatives of the Strategic Plan, released last September at the beginning of fiscal year 2013.

Fortuitous investing by Matz and his team accounted for the remaining $73.9 million of the increase.  The school’s holdings in stock markets, private equity, and real estate and commodities, which together account for 63% of the endowment, performed particularly well, returning 18.1%.  A return of 14.7% on the school’s investments in hedge funds, worth some $187 million, also substantially boosted growth.  By contrast, funds in the bond market brought in relatively little as interest rates increased, Matz said.

Exemplary though it might have been, the school’s success aligns closely with the financial fortunes of most academic institutions in the past fiscal year.  Carleton’s 11.8% return rate is just above the average of the 2013 College and University endowment index of Cambridge Associates, a consultancy.

Matz attributed the spike to the policies of low interest rates and quantitative easing undertaken by central banks worldwide in the face of a still-tepid economic recovery. He added that reactions to the endowment surge should be tempered with caution as financial policymakers begin to roll back these stimulus efforts, making regularly high returns unlikely in the near future.

In general, he said, he and his team eschew a focus on year-to-year increases in the endowment in favor of a stable approach that meets the school’s needs.

“The endowment needs to support the College’s budget in perpetuity so the investment approach needs to be very long term,” he explained.

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