Princeton Endowment Returns 14.2% in 2018

 University’s investment earnings lead all Ivy League endowments so far this year.

The investment portfolio for Princeton University’s endowment returned 14.2% for the fiscal year that ended June 30, raising its total value by $2.1 billion to $25.9 billion from the same time last year. The returns are so far the highest reported by any Ivy League endowment, only Columbia University left to announce its fiscal 2018 results.

It is the second straight year of double-digit returns for Princeton’s endowment, which reported a 12.5% return last year, and easily beat Cambridge Associates’ preliminary mean and median returns for colleges and universities of 8.5% and 8.3%, respectively.  

The Princeton University Investment Co. (Princo), which manages the endowment, also reported an average annual return of 8.0% over the past decade, which it said ranks the university among the top 1% of 458 institutions listed by the Wilshire Trust Universe Comparison Service.

“The earnings from our endowment cover more than half of the university’s annual operating budget, as well as help fund our highest priority strategic initiatives,” Princeton University Provost Deborah Prentice said in a release.

So far this year, all Ivy League endowments have reported double-digit gains, ranging from Princeton’s 14.2% to Harvard’s 10%. According to investment research analysts Markov Processes International, the strong performance has been driven in large part by investments in private equity and venture capital, which have returned 18.7% and 18.3%, respectively, in fiscal 2018, compared to a 14.4% return for the S&P 500.

For example, Markov estimated that private equity and venture capital contributed 8.3% and 3.3% of Yale’s 12.3% return for 2018, with other asset classes contributing only 0.8% of its annual return. The firm also estimated that private equity and venture capital contributed 5.2% and 3.2%, respectively, of Dartmouth’s 12.2% return; and 3.6% and 3.3%, respectively, of Harvard’s 10% return.

According to the Princo’s investment strategy, the endowment’s mission requires a long-term target for returns to exceed 10% per year, which “financial theory and empirical evidence indicate can only be achieved through an aggressive, equity-biased approach.”

As a result, 95% of the university’s portfolio is allocated to equities, with US equities only accounting for 10%. Significant portions of the portfolio are also invested in other high-return asset classes, such as international, hedged, and private investments.


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