Bouncing back from last year's disappointing return, Penn's endowment posted an impressive 6 percent gain in fiscal year 2001.
The figures, released at yesterday's University Board of Trustees meeting, show that Penn's endowment grew to $3.3 billion during the last fiscal year, up from $3.2 billion the year before.
The growth comes one year after Penn suffered as one of few schools to experience a decline during the economic boom of fiscal year 2000. This year, however, Penn was part of a small group of major colleges that showed positive returns despite the recent economic downturn.
The University was criticized last year for relying on "value stocks" instead of technology stocks and venture capital investments, which proved extraordinarily lucrative for schools such as Harvard and Duke universities. But Chief Investment Officer Landis Zimmerman said patience paid off in the long run.
"I think it highlights the importance of having a long-term plan," Zimmerman said. "The worst thing we could have done last year was to compound our error and buy the stocks at their peak. There's no question that not having the technology stocks in 2001 was definitely a blessing."
The University's net assets increased by $150 million during FY 2001, a growth of about 3 percent.
And the Penn Health System had its first profitable year since 1997, ending the year with an operating profit of $25 million.
The once-beleaguered Health System showed growth after Penn announced last February that it would turn the system into a separate not-for-profit organization under the control of the University.
University President Judith Rodin said that although the system is showing signs of recovery, it may never again reach the monetary success that it once had just a few years ago.
"We worked very hard to get ourselves out of" debt, Rodin said. "We'll never see the huge gains in the Health System numbers that we saw in the mid-'90s."
Penn's endowment was 9 percent ahead of the national benchmark; the median return for schools with endowments greater than $1 billion was a 2.4 percent loss. The top 25 percent of schools in that category fell just short of breaking even for the year.
Although Penn was part of a select group to experience growth this year, the University did not experience the economic success that many schools did during FY 2000. Many of Penn's peer institutions had double-digit positive returns that year, while Penn's endowment declined.
During FY 2000, Notre Dame and Duke universities saw nearly 60 percent returns on their endowment, while Harvard saw its already large endowment grow by 32.3 percent.
However, those schools have felt the burden of the rise and fall of the technology industry. Duke's endowment fell 4.6 percent this year while Harvard saw a 2.7 percent loss as well.
Grinnell College in Iowa posted a gain of 24 percent, the largest gain for a school with an endowment exceeding $1 billion. Yale University had the second highest return, at 9.2 percent, followed closely by Yeshiva University in New York at 9.1 percent.
While Brown and Columbia universities reported positive returns on their endowments, Stanford University, Dartmouth College and Massachusetts Institute of Technology reported losses in FY 2001.
Rather than jump on the technology and dot-com bandwagon like many of its peer institutions did, Penn remained heavily invested in a safer, more traditional global equity portfolio.
Rodin said she believes the University is now reaping the benefits of having a low-risk long-term plan.
"We had a strategy that was viewed quizzically," she said. "Fortunately, it behaved exactly as it should have. It doesn't make the bigger percentages in the good times, but it doesn't lose the bigger percentages in the bad times."
However, despite the recent success, Penn's endowment remains relatively low on a per-student level compared to its peer schools. Penn has the fourth largest reported endowment in the Ivy League behind Harvard, Yale and Columbia.
Vice President for Finance and Treasurer Craig Carnaroli said that despite last year's success, the University has to be wary of the recent economic downturn.
"We're pleased with the performance of the last fiscal year," Carnaroli said. "However, we are to be mindful of the turbulence in the financial markets and the weakening economy and the impact the lower endowment returns will have on the University's budget."
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