Endowment weathers stormy markets

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Author: Notre Dame Magazine

After leading the nation in 1999-2000, Notre Dame’s investments posted impressive returns again in fiscal 2000-2001, even if they were negative.

The endowment finished the 12 months ended June 30 — a brutal period for stocks, especially tech stocks — down 7.56 percent from a year earlier to approximately $3.2 billion. During the same 12 months, the NASDAQ Composite Index plunged 45.52 percent and the Standard and Poor’s 500 Index fell 14.81 percent; the Dow Jones Industrials Average rose 2.12 percent. The University’s own investment benchmark — a weighted average of indices from the sectors in which the endowment is invested — fell 10.03 percent.

Although it beat its benchmark and nearly all the stock indices, the endowment drop was still a sharp reversal from the previous year, when the fund gained 57.9 percent, best among U.S. college and universities. That bonanza was helped considerably by investments made years earlier in venture-capital funds.

To put the two years in perspective, the endowment grew by $1.29 billion as a result of the 57.9 percent return in 1999-2000 and gave back only $295 million, or less than a quarter of that amount, during the market downturn of the following 12 months.

Scott Malpass, vice president for finance and chief investment officer, said he forecasts “modest” returns for the endowment over the next few years. For the past five years the fund has posted an average annualized compounded return of 19.7 percent, compared with the benchmark sector-indices average of 13.2 percent.

“We’ve had a philosophy in place 12 or 13 years now and we’re highly diversified,” he said. “We’re not changing our philosophy or strategy because we have a down market.”

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