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University investments pay off

ALEX CAO | Wednesday, October 9, 2013

Notre Dame’s endowment returned 11.8 percent during the previous fiscal year and hit the $8.3 billion mark at the end of June, vice president and Chief Investment Officer Scott Malpass said. 

Malpass, a 1984 Notre Dame alumnus, said the fund’s performance compares favorably to the U.S. stock market.

“I’ve been here 25 years … [and] our endowment pool is about $8.4 billion now,” he said. “Had we just earned the [same as the] U.S. stock market over those 25 years, we’d would be at about $4.6 billion.

“We’re about $3.6 or $3.7 billion more in endowment than we would have been had we just invested in the U.S. market and had just had an index spot. So we substantially outperformed the S&P over that period of time.”

The investment office is more concerned with long-term performance than annual returns, Malpass said, and the median return varies from year to year. He said the median return value typically ranges from around six percent to 14 percent.

 “We don’t have a one-year strategy; we’re a long-term investor,” Malpass said. “So what really matters is the five to 10-year performance. But the median return was higher than the prior year, for sure.”

Malpass said he credits the fund’s success and appreciation in value to investment into private investments, good diversification and the performance of his managers. 

The general strategy behind the fund management is to return inflation plus five to six percent over time, he said.

 “We have to earn at least inflation to make sure the principle’s keeping its purchasing power,”

Malpass said. “We also want to earn five to six percent because we’re spending that every year to support the campus.” 

A University press release said Notre Dame benefitted from “spending distributions of some $286 million for the fiscal year.” Malpass said the endowment money goes toward a multitude of groups across campus, to students and faculty.

“The large portion of that [goes] to scholarships for students, endowed shareholders for senior faculty [and] the library,” Malpass said. “Really all academic programs benefit from the endowment one way or the other. 

Malpass said there are actually more than 5,000 endowment funds that are pooled for investments like a mutual fund.

“There are endowments for the glee club; there are endowments for student activities … every academic department has endowments supporting them,” he said. “[On] my core investment team … we’re all actually Notre Dame alumni, so there’s a real strong sense of purpose and mission.”