Outpacing Peer Schools, Endowment Rises to $25.9 Billion With 14.2% Return on Investments

Princeton’s endowment grew to $25.9 billion in the year ending June 30 on the strength of a 14.2 percent return on investments, outperforming the University’s peer schools.

The endowment’s value increased $2.1 billion during the 12-month period after taking into account investment returns, gifts, and spending. 

Investment returns for other Ivy schools ranged from Columbia’s 9 percent to Brown’s 13.2 percent, while MIT reported a 13.5 percent return and Stanford 11.3 percent. The median endowment tracked by research firm Cambridge Associates rose by 8.3 percent during this time frame.

The average annual return on Princeton’s endowment for the past decade is 8.0 percent, the University said, putting it in the top percentile of 458 institutions listed by the Wilshire Trust Universe Comparison Service.

“There’s always a bunch of luck for the returns in one given year,” said Andrew Golden, president of the Princeton University Investment Co. (Princo). “The returns in any one given year reflect literally decades of decisions.” The endowment works with about 80 fund managers who invest the school’s holdings in strategies such as emerging markets and real assets, and Golden praised their work.

The endowment has supported an increasing share of the University’s annual budget in recent years: 55 percent for 2018–19.

Venture capital and private equity were the main drivers of Princo’s big year, Golden said. More than 30 percent of the endowment falls into that category, which produced a 25 percent return, he said.

Public equities and real assets earned about 13 percent, and the independent-return category earned 7 percent. Princo saw essentially no return from its fixed-income and cash investments.

The endowment has supported an increasing share of the University’s annual budget in recent years: 55 percent for 2018–19, compared to 48 percent two years ago and 36 percent 15 years ago.

The endowment strategy changes with time. Golden noted that a few years ago, few endowments were thinking about investing in cryptocurrencies. Princo has invested in funds that are experimenting in the “crypto” world, he said, but the endowment does not directly hold any digital assets such as bitcoin on its balance sheet.

In the wake of the #MeToo movement, Golden said, he has been stressing to Princo’s managers the need for gender diversity in their firms. “It’s a lot harder to have that [sexual misconduct] behavior when the firms have greater diversity within them,” he said.

Speaking with PAW just days before a market dip in mid-October, Golden said he worries about an increasingly hot market that makes it tough to find good prices. However, he expressed openness to the idea that some sky-high valuations for companies like Amazon may be merited. 

But in general, he’s trying to avoid reading the macro trends such as President Trump’s bull market and is relying more on the individual managers.

Golden, who will be 60 next year, is approaching his 25th year in 2020 at Princo’s helm. He said Princo has been doing succession planning for a decade, but he has no imminent plans to step aside.