The Daily Pennsylvanian is a student-run nonprofit.

Please support us by disabling your ad blocker on our site.

sdf08aja

A specialized focus on diversified investments and international markets has helped the University's endowment swell to $6.6 billion, a figure that was announced at last Thursday's Board of Trustees meeting.

Over the last fiscal year, Penn's endowment grew by an impressive 20.2 percent rate due to a series of strategic investments in areas like international and emerging market equities, real estate, hedge funds and natural resources.

A combination of these asset allocations and a strong market climate joined forces to give such a large boost to Penn's endowment, Chief Investment Officer Kristin Gilbertson said.

To begin with, a strong portfolio is achieved by diversification of investment allocations to reduce risks, she said.

"If you invest in a bunch of different asset classes, chances are not all of them are going to fire or win big in any given year," Gilbertson said.

Penn has increased its investment diversifications and rearranged its asset allocations to its own benefit over the past decade.

According to asset allocation data in the '05 to '06 Annual Financial Report - almost identical to this year's, which has not yet been officially released - over 50 percent of the portfolio is invested in equities, which did particularly well this year, Executive Vice President Craig Carnaroli said.

"Our portfolio has more equity concentration in it than others, and I think we also had great managers in those sectors," he explained.

The data for 2006 shows a strong leaning toward international equities and a small but powerful allocation in emerging market equities, both strategies pushed by Gilbertson.

The investments in emerging market equities, while seemingly minor at about 5 percent, were particularly successful this year, with returns at 42.2 percent.

The University invests in equities in emerging economies in countries like China and Brazil, both driving forces in the emerging equity market.

"They have faster population growth; they are getting their economies under control. . They're new countries - they should grow faster," she said.

The University's hedge funds also had a strong showing this year due to strong manager selection and the funds' ability to generate a lot of money, Carnaroli said.

A growing portion of the University's investments are moving toward alternative investments, like real estate and natural resources.

Real estate, which has benefited from the recent availability of cheap credit, has "been helped because rents have been going up and the economy is strong," Gilbertson said.

Investments in real estate are also made in previously untapped areas abroad, like Eastern Europe.

Natural resource investments have benefited from strong oil and gas prices as well as investments with private partnerships, Gilbertson added.

In the meantime, the Office of Investments has big plans for the alternative investment portfolio, anticipating allocations to grow by about 2 percent each year for the next five years due to investment commitments it has already made.

Comments powered by Disqus

Please note All comments are eligible for publication in The Daily Pennsylvanian.