While Penn's $6 billion endowment may not be as huge as those of financial giants Harvard and Yale universities, it's safe to say that the University is doing its best to catch up.
With the data on returns on Penn's endowment investments for the fiscal year to be released later this week, The Daily Pennsylvanian sat down with the woman behind the numbers, Chief Investments Officer Kristin Gilbertson.
Daily Pennsylvanian: How exactly does the endowment work?
Kristin Gilbertson: When donors and alums give money to the University, many of these gifts are for pretty substantial undertakings, and many of those gifts are not spent in the current year - they're meant to endow programs that will exist for years, if not decades, after that.
We invest these funds with a five- or 10-year or longer time horizon, and every year, a certain portion of the endowment is given to the program that it was originally given for.
DP: Could you give an example?
KG: If someone is endowing a chair, they will give enough money to endow that chair into eternity. Every year, roughly 4.7 percent of that gift is given to the school that received it, and the money is spent in supporting that chair.
What we try to do here in the endowment is we have to try to make that 4.7 percent back because that gift is meant to be there forever.
But we need to keep that gift whole to protect it against inflation, so we need to make at least 9 percent, and if we can make 10 or 15 percent or even 20 percent, that means that there are more funds to support that program and to support Penn.
DP: What kinds of investments does Penn make?
KG: The largest portion is in U.S. equities. We also have fixed incomes and bonds. A growing piece of the endowment is private equity investment, real estate and natural resources.
DP: What are some of your responsibilities as the CIO?
KG: I work with the investment board to determine how much of the endowment should be in public equities versus alternative investments.
DP: How do you think Penn's endowment stacks up to that of schools like Harvard and Yale?
KG: Penn has a different history with its endowment than Harvard or Yale. Penn didn't even have a formal investment office until 1998. We started later, and we've had to work harder, but as time goes on, we're catching up.
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