The State of Our Endowment

I am disappointed by this paper’s recent coverage of the endowment return for the fiscal year that ended June 30, 2015. Let’s get one thing straight: Middlebury’s endowment had a terrible showing this year.

The return on investment was 6.9 percent, which equates to a $19.1 million increase from 2014. Just last year, the return was 16.5 percent, a $113 million increase from 2013. In the span of one year, the gross annual return dropped to one-tenth of the 2014 dollar amount. I call that stagnation.
I don’t understand the positive rhetoric in The Campus’ and the News Room’s coverage of these results. We ought to be in a state of distress: our endowment is floundering in its place, unable to keep up with its flourishing peers producing returns upwards of 20 percent.
Middlebury’s endowment currently stands at $1.10 billion. But that is pocket change compared to what our peer schools have: Williams with $2.45 billion, Amherst with $2.15 billion, and both have fewer students than Middlebury.

This paper quoted Patrick Norton, Treasurer of the College, as calling the 6.9 percent return a “strong annual return given the performance of the global markets” and a “substantial outperformance” of the passive benchmark. I would hesitate to applaud this showing, seeing as Bowdoin posted a return of 14.4 percent—nearly double what Middlebury posted in terms of percentage—in the same fiscal year. Bowdoin’s endowment is still larger than ours at $1.39 billion, even though they have nearly 700 fewer students and proportionally fewer living alumni.

If Bowdoin can post such a tremendous return, why can’t we? Because the way we handle our endowment is ridiculous: a firm in Virginia managing the endowments of twelve other entities, including Trinity College and Barnard College. Investure, based in Charlottesville, is ill-equipped to cater to the individual needs of a newly complex institution nearly 600 miles away.

Interestingly, Investure has become the biggest argument against fossil fuel divestment. In this paper’s coverage of the endowment posting, Mr. Norton insisted that the main obstacle to divestment for Middlebury is that Investure would have to reinvest more than half of its portfolio. “It would have to gain the agreement of the other twelve institutions it represents to do so,” he said.

With this excuse, something becomes clear to me: Investure is not keeping up with the Joneses. Middlebury, it is time to cut the cord on Investure and manage our endowment for ourselves so that at last we can get the monetary returns that the College’s hopes of internal improvement necessitate. It is time to take ownership of our fiduciary future. The only way to survive in this rapidly changing time of higher education is to make wise financial decisions on our own accord. Bowdoin sure has caught on; will we?