The Marlboro Record

The Endowment: Purchasing Power in Perpetuity

Marlboro College’s endowment has grown over the past year, standing at a market value of $35,923,469 at the end of 2012, up from $34,442,966 at the same time the year before. Marlboro has invested these assets in a variety of asset classes, from real estate to fixed-income to equity, under the guidance of Chesapeake Asset Management.

“The idea behind that is to diversify our investments so we don’t have, as the saying goes, all our eggs in one basket,” said Bryant Morgan, chief planning and budget officer. “Some investments will do better in some economies than in others. We spread endowment funds across different asset classes, as well as with different asset managers, so that we have greater assurance that adverse circumstances won’t translate into overwhelmingly adverse results in the endowment.”

The net return on investment for the year ended December 31, 2012, was 7 percent, as compared to 8.9 percent on average over the last 10 years. That level of return over the long term compares favorably with Marlboro’s rate of spending from the endowment, which is typically 5 percent of the endowment’s three-year average market value.

“We want to earn more than we take out of the endowment, so that the endowment, even if there are no additional gifts, can maintain its purchasing power in perpetuity,” said Bryant. “There are some years, like the tumultuous period of 2008 and 2009, when the endowment may take a big dip in value. That’s why it’s important to look at the long term. If we can earn 8 or 9 percent over the long term, and spend 5 percent, the good years compensate for the bad years.”

Due to the extraordinary rebound in the endowment’s value in the last year, and because enrollment figures for this academic year were less than anticipated, the trustees allowed the college to spend an additional 0.75 percent. The 5 percent spending level would have yielded about $1.7 million for the operation of the college. The additional fraction of a percent added almost $250,000, bringing the total including other interest income to $2,051,932. While endowment income usually represents somewhere around 12 or 13 percent of the revenue of the college, this year it was about 14 percent (see chart right).

At Marlboro, like at other colleges and universities, there is a growing interest in investing endowment funds in ways that reflect our values as an institution. In February, Bart Goodwin, Marlboro trustee and chair of the Investment Committee, held an informal discussion on campus to describe the composition of the endowment and how investment decisions were made and to hear the perspectives of community members regarding the investment of endowment funds. This constructive dialogue included input from faculty, students and staff members.

Bart reported that the Investment Committee is collecting information on how other colleges are engaging in SRI, or socially responsible investment (also known as ESG, for environment, society and governance), and is assessing how SRI principles could be addressed in the investment policy of the college. He observed that the Investment Committee is sensitive to the social and environmental concerns of the college community, and will continue to explore options in this area.