Cornell’s $3.3 billion endowment rode the tides of a rising stock market to see a 16.1 percent return in the 2004 fiscal year. As of Jan. 31, the endowment was up another 8.6 percent for fiscal year 2005.
Though drastically improved over 2003’s return on investment (ROI) of 1.9 percent, Cornell’s endowment still saw a lower rate of return than that of any other Ivy League institution. Don Fehrs, Cornell’s chief investment officer, attributed this disparity to differences in each schools’ investment portfolios.
“Harvard and Yale were the two highest performers for fiscal 2004, and both had higher weightings than we did in emerging market stocks, one of the best asset classes for that period, but that is only one aspect of portfolio performances,” said Fehrs.
Harvard’s endowment, which, at $22.6 billion, is the nation’s largest, gained 21.1 percent in fiscal year 2004; Yale’s endowment posted a return of 19.4 percent. Cornell’s ROI slightly trailed those of Brown, Princeton and Penn, which earned 16.3, 16.5 and 16.8 percent, respectively. Dartmouth’s rate of return was 18.6 percent.
“We’re just below the middle of the pack,” Fehrs said.
The poor performance of the stock market in previous years has put pressure on the University for its endowment’s lackluster returns, explained Ronald Ehrenberg, the Irving M. Ives Professor of Industrial and Labor Relations and Economics.
“The relatively poor performance of the stock market during the early 21st century has limited the amount that the University can pay out from the endowment each year. In some years the payout actually fell. This puts pressure on undergraduate tuition and limits the size of salary increases that the University can give to faculty and staff. We are all much happier when the endowment is booming,” Ehrenberg said.
In response to the improved performance of the endowment, Cornell’s trustees recently voted to increase the share of the endowment that is used to pay for the University’s operation. Currently, eight to nine percent of Cornell’s budget is funded by the endowment, with the remainder of the money coming from tuition and grants. The trustees voted to raise this share between two and three percent.
“The decision to increase the dividend was done with the best interests of the students and the University in mind,” said Jackie Koppell ’05, student-elected trustee.
Cornell’s endowment functions like a mutual fund. Individual colleges, in addition to the central University, own shares of the endowment. The share of the endowment owned by the University largely funds financial aid while the bulk of the shares owned by the individual colleges typically pay for endowed professorship.
Though the private colleges at Cornell are commonly referred to as the “endowed” colleges, both the privately funded colleges and Cornell’s statutory colleges have shares in the endowment. The endowment is invested in a combination of stocks, bonds, real estate and alternative forms of investment, according to Ehrenberg.
At $3.3 billion, Cornell’s endowment is on par with other Ivy League schools in absolute terms. According to Fehrs, Cornell has a larger endowment than those of Brown and Dartmouth and has an equal one to that of Columbia. Cornell trails, however, when its endowment is compared with other Ivies on a per-capita basis, says Ehrenberg.
“Cornell University’s endowment is large, but on a per-student basis, we lag far behind the richest Ivies: Harvard, Princeton and Yale. Dartmouth and Columbia are in the next group and then Cornell, Penn and Brown are down at the bottom of the Ivy League,” Ehrenberg said.
“Princeton, for example, gets more endowment income per student than Cornell takes in per student from endowment income and tuition per student [combined],” Ehrenberg stated.
Archived article by Daniel Palmadesso
Sun Staff Writer