A Year of Growth

The University’s endowment enjoyed an investment return of 19.6 percent in the fiscal year ending June 30, reaching an all-time high of $21 billion, the Princeton University Investment Co. (Princo) announced in mid-October.

Driven in part by the success of venture-capital investments made many years ago, the endowment climbed $2.8 billion from a year earlier. The actual investment return before spending from the endowment was about $3.5 billion.

The endowment growth puts the average annual increase in the value of the endowment over the past decade at 10.5 percent, and for the past 20 years at 13 percent. 

Princeton’s endowment return for 2013–14 was the second-highest among Ivy League schools, behind Yale’s 20.2 percent. 

A retreat in the financial markets last month reduced the endowment’s value by a few percent, said Andrew Golden, president of Princo. “The new fiscal year is off to a little bit of a rocky start, so we’ve suffered oh-so-slight losses,” Golden said in an interview. 

Despite the October market decline, Golden expressed confidence in the University’s portfolio. He noted that in the last year, venture-capital investments grew by 42 percent. Six companies — four from the venture-capital portfolio and two public biotech firms — that were worth $225 million at the beginning of the fiscal year had an average return of 200 percent in the last fiscal year.

Venture-capital funds invest in companies in their early years, and record gains when the companies are sold or sell shares at a higher valuation.

Golden said Princo’s investments in specific companies and trends should serve it well “regardless of what goes on in the markets.” 

The University’s endowment seeks to allocate 9 percent of its funds to U.S. stocks; 6 percent to stocks in foreign developed countries; 10 percent to stocks in developing countries; 24 percent to a category called “independent return,” firms that make bets on specific companies or strategies; 25 percent to private equity (investments in private companies); 21 percent to real assets, which include real estate and natural resources; and 5 percent to fixed income and cash. For the most part, the endowment’s actual allocations closely match the targets, though private equity is overallocated at 32.3 percent.

In the year ending June 30, the highest-performing asset group was private equity, which returned 28.8 percent. That was followed by U.S. stocks (26.6 percent); developing-country stocks (24.2 percent); developed-country stocks (20.3 percent); real estate and natural resources (14.9 percent); independent return (10.9 percent); and fixed income and cash (.4 percent).

Over the past year, Golden said, roughly $900 million flowed out of the endowment for spending and other matters.

While Princo will continue to seek double-digit returns, “it would be unreasonable to think the next two decades would be as strong as the last two,” he said. “That’s not what the probabilities would suggest.”