Cornell’s endowment remained flat in the first quarter of the 2011-2012 fiscal year, which ended Sept. 30, despite significant declines in the stock market over the same period. At the same time, the University announced it would refinance its debt to mitigate concerns about the market’s volatility.
“The $5.2 billion endowment is flat so far in calendar 2011, thanks to a well-diversified portfolio and best-in-class managers, both of which continue to add value in down markets,” A.J. Edwards, Cornell’s interim chief investment officer, said in a press release.
Over the same period of time, stock indexes plummeted — the S&P 500 fell 10.63 percent and the Dow Jones Industrial Average fell 14.39 percent.
While continuing to maintain a diversified endowment portfolio in a volatile market, the University says it is also working to refinance its own debt. According to Joanne DeStefano, Cornell’s chief financial officer, Cornell will refinance its variable-rate bonds and replace them with fixed-rate bonds.
The fixed-rate bonds will allow the University to pay a fixed rate on the debt each month, instead of a varying rate based on the market interest rates, which DeStefano said will insulate the University from market volatility.
“Having a higher proportion of debt with fixed interest rates allows us to better predict how much money we’ll have coming in and going out, and that makes our budgets more accurate. And it allows for less uncertainty during volatile market conditions,” DeStefano said.
In 2008, 80 percent of the University’s outstanding $1 billion debt portfolio was in variable-rate bonds and 20 percent in safer fixed-rate bonds, according to a University press release. Today, the reverse is true, with 80 percent of the debt in fixed-rate bonds and 20 percent variable interest rates.
“Cornell is now in a much better position to withstand the type of market volatility we are currently experiencing compared to three years ago,” DeStefano said in a press release. “We have taken several steps to reduce fiscal risk, and in addition, over the past couple of years, we have put several cost controls in place and seen our expenses go down.”
Cornell’s endowment has recovered significantly since the 2008 financial crisis, posting a 17 percent gain in the 2010-2011 fiscal year, which ended June 30.
As Cornell posted its endowment numbers for the first quarter of the 2011-2012 fiscal year, other universities only recently released data on their performances in the 2010-2011 fiscal year.
Yale announced Sept. 28 that its endowment posted a return of 21.9 percent in the past fiscal year, according to The Yale Daily News. Harvard posted a slightly lower return, finishing out the fiscal year with a 21.4 return, The Harvard Crimson reported. The University of Pennsylvania also bested Cornell, posting a return of 18.6 percent, according to The Daily Pennsylvanian. Dartmouth drew an 18.4 percent return, according to the Dartmouth Office of Public Affairs.
Tommy Bruce, vice president of university communications, said that last year’s 17 percent returns were still stronger than many other universities.
“We’re smack dab in the middle,” he said. “We’re very satisfied with the performance and we believe were in the right position to go on and succeed.”