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Endowment pool continues to grow

Megan Doyle | Tuesday, September 20, 2011

When University President Emeritus Fr. Ted Hesburgh became president in 1952, Notre Dame’s endowment fund was approximately $7 million.

Today, Chief Investment Officer Scott Malpass said the University’s endowment fund for the 2010-2011 fiscal year amounts to over $7 billion.

“Notre Dame’s endowment growth over the last 20 or 25 years has been one of the biggest reasons we have been able to dream and do more,” Malpass said. “This year we will end up [with our endowment fund] at $7.3 billion. That’s about a 21.5 percent return.”

The value of the endowment fund at the end of the 2009-2010 fiscal year was about $6.1 billion, Malpass said.

“We would want students to know that we have a sophisticated investment management operation trying to earn superior risk-adjusted returns so that we can help students and faculty realize their dreams,” Malpass said. “I mean that very sincerely. Whether its financial aid to help them be here, endowed chairs so we can recruit top faculty and promote faculty … just know that we are working hard to try to provide the resources to have students and faculty function at the highest level.”

The University’s endowment is traditionally one of the best in the nation, Malpass said.

“We’ve been one of the top performing endowments in the nation in the last 15 or 20 years,” Malpass said. “We’re in the top one percent of institutional investors.”

The endowment fund finances a diverse range of campus programs, he said.

“We talk about it like it’s one pool, but it’s actually almost 5,000 different funds set up for scholarships, endowed chairs for senior faculty, for the library, for various academic programs,” Malpass said.

The largest portion of the University’s endowment supports financial aid. Malpass said about a third of the fund contributes to scholarships and fellowships.

“Our financial aid program has just gotten so strong here over the years,” Malpass said. “I remember in 1990, we spent about $5 million on grant aid, actually scholarship aid to students. This year we spent $100 million … A big portion of that is funded through endowment.”

While the market reels in the United States and abroad, Malpass said he is also proud Notre Dame’s investment portfolio continues supporting programs at the University.

“We did not have to cut our endowment spending,” Malpass said. “We did not have to cut faculty and staff or any programs as a result of the crisis … And because we didn’t have to cut endowment spending, we were able to hire some tremendous young new faculty that in the past we wouldn’t have been able to afford. That’s a huge positive for the University.”

Notre Dame’s endowment supports almost 400 faculty chairs across all departments. Despite volatile markets, Malpass said the endowment also continued to support financial aid over the past few years.

“That’s probably what my team is most proud about — what that increase in financial aid has done over the years for the quality and diversity of the student body,” Malpass said. “It’s just been fabulous to watch these talented young people from all over the country and the world come here and be able to afford it.”

The University’s investment portfolio was down about 20 percent — compared to about 30 percent at peer institutions — during the depths of the financial crisis several years ago, Malpass said. However, the endowment fund’s current figures show a significant rebound from those numbers.

“If you had told me that we would have a crisis where most of the world’s big banks were insolvent because of the subprime and … that basically three years later we would have recovered our value from the drop and actually be at a new high and not have to cut spending, I would have never thought that could happen,” Malpass said. “It’s a wonderful outcome.”

The Office of Investment did not falter in its philosophy during difficult financial times, Malpass said.

“We know that we have a good, broadly diversified portfolio,” Malpass said. “We have good managers. We invest all over the world in all kinds of different asset classes, so that protected us some. It was a huge meltdown in the markets and everybody lost money, but relatively, we did okay.”

This portfolio includes a number of start-up investments that have seen huge success, Malpass said.

“We are a pretty big venture investor,” he said. “I don’t think students today realize that we were one of the early investors in Google, in Yahoo, in YouTube.”

Notre Dame’s identity as a Catholic university influences its endowment, Malpass said.

“We comply with the bishops’ guidelines on investing, so we have some restrictions based on Catholic social teaching,” he said.

The University does not invest in companies that violate these guidelines, Malpass said. For example, Notre Dame’s investment managers would not work with companies involved in stem cell research, contraceptives or pornography.

“I don’t think that [Catholic social teaching] limits us in terms of getting good returns, though,” Malpass said. “I think it’s just part of who we are.”

The future of the economy is uncertain, Malpass said, but he remains “hopeful.”

“I still think we have a couple of years of volatility and uncertainty and probably modest returns,” Malpass said. “That was a pretty nice rebound, 21.5 percent, but now we have to build the rest based on some real economic growth. This fiscal year is likely to be more modest than that … It’s hard to know, but we’re going to keep at it.”