Endowment sees 3.9 percent drop

The most tumultuous year in the financial markets in recent memory led Penn's endowment to shrink by 3.9 percent over the past year.

As of June 30, the close of the fiscal year, the endowment was valued at $6.3 billion.

And while the decline poses a setback to the University's endowment, officials are not terribly worried about the longterm prospects of financial growth.

In the previous fiscal year, the endowment experienced a record growth of 20.2 percent, ballooning from $5.3 billion to $6.6 billion.

"It's important to put [the endowment] in the context of the financial markets in general," Penn Executive Vice President Craig Carnaroli said of the decline.

"The month of June alone was the worst month in the stock market since 1929."

Given the economic climate, "we actually had a pretty reasonable performance," Penn Chief Investment Officer Kristin Gilbertson said, noting that the endowment outperformed the equity markets, which were down by a total of 13.9 percent.

Endowments, Carnaroli explained, are typically equity-oriented, as those tend to perform best in the long run.

Since the collapse of the subprime mortgage industry in March 2007, the markets have experienced a trickle down as affected assets carved their way throughout the financial system.

As financial forecasts dimmed over the past few years, Penn "sanitized" its portfolio to avoid unsafe investments, Gilbertson said.

For instance, she said, the University currently has a fairly liquid portfolio- - comprised of cash funds and treasury securities - which will not be affected by the subprime tremors.

Despite the dip, both Carnaroli and Gilbertson say the University is currently well-positioned for the coming year.

Carnaroli emphasized that endowments are meant to sustain institutions for the long-term and that based on three- and five-year return percentages, the endowment has grown 9.1 and 10.5 percent, respectively.

"While the return number is not what we would aspire for it to be . [this year], we sowed the seeds for future success," Carnaroli said.

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