Endowments Hold Up in Recession

Author: Samuel Wilson

The Middlebury College endowment suffered losses as a result of the current recession, but it is doing well in comparison with the rest of the economy. As of Sept. 30, the endowment stands at $550 million.
The total endowment is a pool of different, individual endowment funds. These are funds comprised of gifts to the College, investments into which gifts are put and dividends from the investments. Gifts may be restricted to specific purposes, such as building projects and professorships, or donated to the College to use as it sees fit.
The endowment is overseen by the Investment Committee, which in turn reports to Board of Trustees and College Treasurer.
Middlebury invests primarily in United States equities and government bonds. Most of the equities are public corporations such as General Motors and Coca-Cola, although the College does hold private investments as well.
Middlebury mostly pursues long-term investments. Primarily, they are safer than venture capital. For instance, the College did not invest in the technology boom of the 1990s and, thus, the subsequent fiscal implosion was not a crisis. The endowment is also a continued investment. It needs to support Middlebury today and remain strong enough to do so decades in the future. As Middlebury Investment Administrator and Vice President for Administration and Treasurer Derek J. Hammel said, "The endowment's life is perpetual. We cannot take a lot of bets."
The present recession has hurt the entire United States economy. Since 2000, the Standard and Poor's 500 Index has fallen 49.1 percent, a drop second only to the crash of 1929. Overall, the stock market is at a five-year low with everything except government bonds down.
However, shrewd investing by the College has kept the endowment's performance above the rest of the economy's. In the calendar year to date, the endowment is down only 13 percent. Middlebury's use of hedge funds, which are generally stronger when the economy is weak but not as potent when the economy is strong, helped prevent larger loss. Twenty percent of the endowment is kept in such funds. In the past 18 months, the College has begun investing in more international equities as well.
Hammel remains confident: "On an absolute scale the endowment is sub-par, but relative to everything else it is in good shape. Long term, we will do fine."