Despite economy, Penn's endowment stays even

While some peer institutions are announcing layoffs to cope with large endowment losses, the University of Pennsylvania has fared better - and yesterday's report to the Board of Trustees reflected that optimism.

Perhaps most encouraging, the university's $5.6 billion endowment was up 10 percent for the most recent quarter, ending Sept. 30, and flat for the 12-month period. During the same period, the market dropped 9.4 percent.

"It's hard to believe it's flat from 12 months ago," said trustee David Silfen, senior director of the Wall Street investment firm Goldman Sachs Group Inc., at yesterday's regularly scheduled board meeting.

"I'm also happy to report that the endowment has not experienced - unlike several peer institutions - any liquidity issues, and we have sufficient cash on hand to meet any capital calls and endowment payout well into the foreseeable future."

For the fiscal year 2009, ending June 30, Penn's return on its endowment fell 15.7 percent - a hefty loss, but still much better than the rest of its Ivy League peers.

Yale was down 24.6 percent on its $16.3 billion endowment; Princeton fell 23.7 percent on its $12.6 billion endowment. And Harvard recorded a 27 percent decline on its $26 billion endowment. Cornell, Dartmouth and Brown also saw losses of greater than 20 percent. The only Ivy League school that came close to Penn's performance was Columbia, at a 16 percent loss.

"Major factors behind our outperformance were our decision to reduce public equities by 10 percent in early 2008 to fund credit investments, a strong quality tilt in our public equity portfolio, and our having maintained a 15 percent weight in cash and Treasuries going into the crisis," said Kristin Gilbertson, chief investment officer.

She attributed Penn's flat results for the annual period ending Sept. 30 to its "strong performance in the second and third calendar quarters, which in turn was fueled by a rebound in our public equity and credit portfolios."

"I never thought I would be so excited to be flat, but it's been an interesting year."

Nationally, university endowments for all types of institutions are expected to have dropped 15 to 25 percent for the fiscal year ending June 30, 2009, said Ken Redd, director of research and policy analysis for the National Association of College and University Business Officers. His organization is still compiling the statistics.

Princeton, Harvard, and some other peer institutions have announced layoffs in recent months to cope with the decline in endowment revenue. Harvard also took steps to cut costs, such as no longer serving hot breakfasts in undergraduate housing.

"We're not as endowment-dependent," explained Penn executive vice president Craig Carnaroli. "We're more tuition-dependent than most schools. We're more balanced, more diversified."

Penn has had layoffs at its museum and veterinary school - due to a projected decline in state funding - but has not had to lay off employees in the main university, he said.

In response to the recession, Penn targeted $57 million in spending cuts. The university has saved $54 million of that goal by decreasing capital expenditures, eliminating raises for some employees, and tightening meal and travel expenses, Carnaroli said. The university in December announced plans to make the cuts over 18 months.

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