A Not-So-Satisfying Year: Endowment’s 6.2% Investment Return Puts Princeton in Ivies’ Lower Tier

The University’s endowment notched a return of just 6.2 percent in the fiscal year that ended June 30, a result that Princeton’s endowment chief conceded is “less than fully satisfying.”

In a year when every Ivy League school’s endowment posted smaller returns than in the year prior, Princeton’s results were in the bottom half of the group. Brown’s endowment performance led the Ivies in the past year with a return of 12.4 percent, followed by Dartmouth with 7.5 percent and Penn and Harvard with 6.5 percent. Trailing Princeton were Yale with 5.7 percent, Cornell with 5.3 percent, and Columbia with 3.8 percent.

Princeton’s $26.1 billion endowment, up about $200 million from the previous year, remains the third-largest among the Ivies.

“The return leaves me wanting more,” said Andrew Golden, president of the Princeton University Investment Co. (Princo). “Some years things break your way and some years they don’t.” Last year the endowment’s 14.2 percent return on investment outperformed Princeton’s peer schools.

During the past year, “diversification of any kind hurt,” Golden said. Princeton’s private-equity portfolio, which accounts for 39 percent of the school’s investments, rose by about 14 percent. Investments in public equities in developed markets fell by 1 percent, while public equities in emerging markets rose by 4 percent. What is called “independent returns,” such as some hedge funds, appreciated by 5 percent, the fixed-income category returned 3 percent, and the allocation to real assets essentially broke even.

During the past year, “diversification of any kind hurt. … If you did anything other than show up in U.S. stocks and U.S. bonds, you created headwinds for yourself.”

— Princo president Andrew Golden

“If you did anything other than show up in U.S. stocks and U.S. bonds, you created headwinds for yourself,” Golden said. But he said the University is not broadly rethinking its strategy: Princo calculated that if it had done exactly that over the last two decades — just invest in U.S. stocks and bonds — then Princeton’s endowment would total about one-twelfth of what it is today.

The average annual return on the University’s endowment for the past decade is 11.6 percent, which places Princeton among the top percentile of 500 institutions listed by the Wilshire Trust Universe Comparison Service.

The endowment is projected to provide about $1.4 billion, or 57 percent, of the University’s annual operating budget. Princeton said the endowment supports more than 80 percent of undergraduate financial aid, which increased 7.2 percent to $187 million for the current year.

Some of Princeton’s peer schools have tried to square their endowment’s focus on returns with new calls for mission-driven investing. Harvard’s endowment recently joined Climate Action 100+, an investor group pushing for more aggressive measures on climate change.

Golden said Princo would not be part of that effort. “We’ve looked at various entities — and all of them come up short in terms of having a meaningful impact in the way that we do business,” he said. He worries that by joining, Princo could end up making political advocacy statements: “You somehow lose control over the messages that we make or don’t make.”