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BREAKING: Endowment Suffers 1.9% Investment Loss; Drops Overall By 4.0%

Bloomberg is reporting that the endowment has dropped in value during the 2016 fiscal year (ending June 30):

Dartmouth posted a decline of 1.9 percent for fiscal 2016 and the value of its fund dropped about 4 percent to $4.5 billion, according to a statement Friday…

The decrease at the Hanover, New Hampshire-based school reflected net investment losses of $100 million and distributions of $209 million to support Dartmouth programs. That was offset by new gifts and transfers of $119 million.

The endowment said it had annualized gains of 8.7 percent for three years; 8.8 percent for five years and 7.2 percent for 10 years through June 30.

Just to lay this calculation out more clearly: on July 1, 2015 the endowment was worth just under $4.7 billion. During the year the College used approximately $208 million of this money to fund operations. And the remainder of the endowment money that was invested in myriad different ways by the College during the year lost about 1.9% of its value. However gifts from alumni and other donors in the amount of $119 million came in to offset the use of funds and the investment losses. As as result, by June 30, 2016 the endowment had declined about 4% from $4.7 billion to about $4.5 billion.

The College aims to draw out about 5% from the endowment’s value each year to fund its operations. It uses a smoothing formula based on the endowment’s three previous years’ results to determine how much money it will use. If cooler heads prevail in Parkhurst, the current slight drop should have little effect on the College’s operations. After all, the decline in 2016 only drops the endowment back to where it was at the end of fiscal 2014.

Addendum: In an article about the troubles facing the Harvard endowment, the WSJ lays out the ten-year performance of the Ivy endowments. We look pretty good:

Ivy Ten Year Endowment Perfromance.jpg

Addendum: Harvard and Penn have also reported declines in their endowments this year. Harvard’s investments lost 2% of their value, leading to a drop of 5% in its endowment. Penn had an investment loss of 1.4%, but its overall endowment grew by 6% due to strong giving and a one-time asset transfer. Running better than the pack, as it often does, Yale’s endowment investments posted a positive return of 3.4%, but due to high spending, the net value of the endowment was virtually unchanged. The rest of the Ivies have yet to report on their results.

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