Endowment stable despite slowdown
Harvard and Yale could learn a lesson or two from Bowdoin. This past year, the school's endowment, composed of funds or property donated as a source of income, had a 1.45 percent return in contrast to the -4.89 percent average among colleges and universities across the nation. This number safely put Bowdoin in the top five percent of schools, along with Emory University, Grinnell College, and Princeton University. Furthermore, taking into account the size of the college and student body, Bowdoin had the highest per student return.
This is especially good news considering the rough state of the economy. Katy Longley, Senior Vice President of Finance and Administration and Treasurer, described how the many colleges are reforecasting their budgets as a result of the downturn. In the past, the treasurer's team assumed spending five percent of the growth of the endowment, but this assumption was during the booming 90s economy.
Being in this positive financial position requires extensive care, and Paula Volent, Vice President for Investments, is one of several administrators in charge of working with the endowment, which, as of June 2002, hovered at $430.6 million dollars. Volent describes this process as a "balancing act." When managing such an account the main idea, said Volent, is to "stay focused and have an investment policy for the long run." Keeping the future in mind is essential, because the most important aspect of endowments is the way that the money "lives" forever-there are no taxes and there is a perpetual time frame, thus making it a very adaptable source of money.
The endowment is primarily run by the Trustee Investment Committee. Outside managers are chosen to supervise the portfolio rather than Bowdoin officials investing in individual stocks. Extensive research is done to decide on the stock managers, and, after great care, the committee votes on which manager to choose. One powerful indication as to whether the managers will be qualified and working to their best ability is if they have the confidence to invest their own money in the stocks they have suggested for the school.
One concept Volent keeps in mind when dealing with the money is that of the modern portfolio theory. Furthermore the fundamental rules of investment, such as a diversified portfolio, are generally followed. Bowdoin's Asset Allocation Policy is currently divided between inflation protection assets (6 percent real estate), fixed income (13 percent bonds), private equity (venture capital 16 percent), core equity (25 percent stocks), and absolute return (40 percent).
Although the market has been in great turmoil these past two years, Bowdoin has managed to maintain a positive yield on endowment. Volent remarked that she was "thrilled we have done a really good job and a lot of colleges are looking to Bowdoin as a result." Temporary growth is not the only mission of financial managers; long-term achievement is important also because the endowment is to benefit future students too. Volent believes that this success will continue for Bowdoin , especially given that "[we are] beating everyone so far this year, too."