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Don’t Blame the Endowment

The NYT summarizes the past decade’s investment story:

It was a decade that began with such promise. Stock markets in Europe and America ended the 1990s at record levels, and even bedraggled Japan was at a two-year high. “Dow 36,000” was on some best-seller lists.

Instead, it became a decade that richly earned the name “the zeros.” For the entire developed world, that was just about the decade’s total return.

The United States stock market lagged even that modest return. According to the MSCI indexes, which measure virtually all stock markets using consistent criteria, an investor in the American market who reinvested all dividends [emphasis added] — and who somehow avoided all taxes and transaction costs for the decade — would have ended 2009 with 12 percent fewer dollars than when the decade began. That is an annual return of negative 1.3 percent.

Over the same time period, Dartmouth’s endowment rose by an average of 5.1% each year, even after we had imprudently drawn out as much as 7% of its total value annually. Unlike the above-mentioned indices, we ended up the decade with 65.1% more dollars than we started with.

Endowment DartblogX.jpg

Today the College is in a financial crisis, to be sure, but not because an insufficient amount of money came in the door.


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