MU's endowment performance

[Coleman]

Is roughly half as good as the S&P500's performance. Is this normal? Seems pretty bad. My index funds are crushing it. Do we actually pay someone for this?

https://www.marquette.edu/endowment/endowment-performance.shtml

       Fiscal Year Ending
    5-Year Annualized       2019   2018     2017   2016    2015
Market Value (in millions)       $698.0   $668.8   $626.2   $550.1   $551.6
Endowment       5.5%       5.3%       7.9%       11.8%       -0.9%       3.7%
S&P 500 Index  10.7%   10.4%   14.4%   17.9%   4.0%   7.4%

 

 

[GB Warrior]

I thought it was managed by the AIM students *ducks*

[Eldon]

Is roughly half as good as the S&P500's performance. Is this normal? Seems pretty bad. My index funds are crushing it. Do we actually pay someone for this?

https://www.marquette.edu/endowment/endowment-performance.shtml

       Fiscal Year Ending
    5-Year Annualized       2019   2018     2017   2016    2015
Market Value (in millions)       $698.0   $668.8   $626.2   $550.1   $551.6
Endowment       5.5%       5.3%       7.9%       11.8%       -0.9%       3.7%
S&P 500 Index  10.7%   10.4%   14.4%   17.9%   4.0%   7.4%

MU definitely pays someone to do this.  Schools are very risk-averse with respect to their endowments so keep that in mind.

[warriorchick]

MU definitely pays someone to do this.  Schools are very risk-averse with respect to their endowments so keep that in mind.

Exactly.

[ZiggysFryBoy]

So ya sayin dat Marquette's wang aint as uuuge as some udder endowments?  Its da genetics, aina?

[dgies9156]

MU definitely pays someone to do this.  Schools are very risk-averse with respect to their endowments so keep that in mind.

I agree with this analysis. It looks better when you consider a 4-year CAGR, which makes it about 6.1 percent.

But, a college is not going to identify a set of higher risk stocks that have massive return but strong loss potential and go bet the ranch. The portfolio needs income now, so I would expect that the portfolio managers are using a balanced approach that combines current income with long-term capital appreciation.

With people like Mary Ellen Stanek on the BOT, I am sure they're doing fine!

[The Hippie Satan of Hyperbole]

With only 35% in the equity market, and only have in domestic equities, the S&P is a poor metric. They’d rather sacrifice performance in up markets by decreasing downside risk. Here is the asset allocation.

https://www.marquette.edu/endowment/asset-allocation.shtml

[Not A Serious Person]

Is roughly half as good as the S&P500's performance. Is this normal? Seems pretty bad. My index funds are crushing it. Do we actually pay someone for this?

https://www.marquette.edu/endowment/endowment-performance.shtml

       Fiscal Year Ending
    5-Year Annualized       2019   2018     2017   2016    2015
Market Value (in millions)       $698.0   $668.8   $626.2   $550.1   $551.6
Endowment       5.5%       5.3%       7.9%       11.8%       -0.9%       3.7%
S&P 500 Index  10.7%   10.4%   14.4%   17.9%   4.0%   7.4%

Your post is misleading.  They showed several benchmarks and you deleted all of them except for the S&P 500.

Here is what was presented.

millions)       $698.0   $668.8   $626.2   $550.1   $551.6
Endowment   5.5%   5.3%   7.9%   11.8%   -0.9%   3.7%
Policy Index   4.2%   4.2%   7.3%   10.6%   -1.6%   1.0%
S&P 500 Index

10.7%   10.4%   14.4%   17.9%   4.0%   7.4%
MSCI AC World ex USA (Net)   2.2%   1.3%   11.1%   20.5%   -10.2%   -5.3%
Barclays Capital Agg. Bond Index   2.9%   7.9%   -0.4%   -0.3%   6.0%   1.9%

MU definitely pays someone to do this.  Schools are very risk-averse with respect to their endowments so keep that in mind.

They detail their investment objectives:

The Fund’s investment objective is to preserve its purchasing power, while providing a continuing and  stable  funding  source  to  support  the  overall  mission  of  Marquette  University.   

To  accomplish this objective, the Fund seeks to generate a total return that will exceed its annual spendable amount, all  expenses  associated  with  managing  the  fund  and  the  eroding  effects  of  inflation.    It  is  the intention  that any  excess return  (interest  income,  dividends,  realized  gains,  and  unrealized  gains), above  and  beyond the  amount  approved  for  expenditure  or  distribution,  will  be  reinvested  in  the Fund.  The Fund will be managed on a total return basis, consistent with the applicable standard of conduct set forth in the Uniform Prudent Management of Institutional Funds Act (UPMIFA)adopted by the state of Wisconsin in 2009.

The stock market declined 50% twice in the last 20 years, 2001 and 2008.  Could it happen again ... eventually?  Of course.  And all the CNBC talk that the market comes back will not be good enough.  MU, like any endowment, needs the endowment to cover expenses NOW.

A stock decline of 50%, and even it completely recovers the next year, that year means lay-offs, cuts in financial aid, program offerings, and new buildings get put on hold (if you raise a $100m for a dorm, put it in an index fund, and it's turned into $60 million on a downturn, you're not building that dorms until the market recovers, which could be many years.)

So, to be totally in index funds is wildly reckless.  That is precisely why they listed a bunch of benchmarks and the State of WI UPMIFA. They are matching assets and expected performance with expected liabilities and future payments (like a new dorm).

You can be 100% in index funds because you are not withdrawing from those investments every month for car payments, your mortgage or to buy groceries ... the equivalent of what an endowment is for.  If you are, and you are 100% in stock index funds ... you're on the road to financial disaster when we have another downturn.

I thought it was managed by the AIM students *ducks*

I believe it is less than $2 million on a $700 million endowment.

[warriorchick]

I imagine in years like 1974 and 2008, the endowment fund did significantly better than the S&P 500.

[mu_hilltopper]

Question .. how does MU's investment performance compare to other like universities?   DePaul, Creighton, SLU, etc?

[Coleman]

I guess some of you are right that it isn't fair to compare to the S&P500, if that is not the objective of the endowment. I wasn't trying to cherry pick, but it is the metric that MU provided that I was most familiar with.

I am just surprised the returns are so mediocre given the scale of the amount they can invest and the brainpower they presumably have managing it. It has been double digit returns for the stock market for the past decade and they are returning mid single digits. I was just surprised.

[warriorchick]

I guess some of you are right that it isn't fair to compare to the S&P500, if that is not the objective of the endowment. I wasn't trying to cherry pick, but it is the metric that MU provided that I was most familiar with.

I am just surprised the returns are so mediocre given the scale of the amount they can invest and the brainpower they presumably have managing it. It has been double digit returns for the stock market for the past decade and they are returning mid single digits. I was just surprised.

If they were only invested in the stock market in the past decade, I would expect double-digit returns.  They did not. And they cannot:

https://www.marquette.edu/endowment/documents/Inv%20Pol%202010.pdf

[Billy Hoyle]

they probably shouldn't have sunk so much money into that Peloton IPO.

[Benny B]

I thought it was managed by the AIM students *ducks*

AIM only manages about $1M, or 0.14%, of MU's endowment.\


And as others said, university endowments are essentially a fixed-income fund with a minimal growth component... in other words, it should do slightly better than a bond index in a bull market but better than an equities index in a bear market.

[Tortuga94]

I manage a few endowments and there are always limits as to how much risk(equity exposure) you are allowed, so comparing the performance to the S&P 500 is definitely not an apples to apples comparison.

The ones I manage limit the equity exposure to 60%. Keep in mind that will have large cap(S&P 500), mid, small, intl'l and EM stock exposure.

However, if that is a 2019 YTD performance, that isn't very good for this year. The market has had a great year this year, and even at 50% equity they should be well above 5.5% for the year.

[Dr. Blackheart]

I manage a few endowments and there are always limits as to how much risk(equity exposure) you are allowed, so comparing the performance to the S&P 500 is definitely not an apples to apples comparison.

The ones I manage limit the equity exposure to 60%. Keep in mind that will have large cap(S&P 500), mid, small, intl'l and EM stock exposure.

However, if that is a 2019 YTD performance, that isn't very good for this year. The market has had a great year this year, and even at 50% equity they should be well above 5.5% for the year.

It’s FY ending June 30th...so not YTD.

[Not A Serious Person]

It’s FY ending June 30th...so not YTD.

Many endowments use June 30 as a year-end.

[4everwarriors]

Always a good idea ta keep close tabs on da performance of won's endowment, aina?