The College's most recent annual report includes this summarizing letter from the chief investment officer.
On June 30, 2013—the end of the fiscal year—the Wellesley College endowment had a market value of $1.576 billion (versus $1.469 billion on June 30, 2012—an increase of $107 million). Investment return earned by the endowment portfolio for this fiscal year, net of investment management fees, was 12.5 percent.
Fiscal 2013 Developments
Stabilization and improvement in developed market economies during FY13 resulted in strong gains in global equity markets. U.S. and non-U.S. developed equity markets posted double-digit returns. In emerging-market equities, moderate local currency returns were partially offset by currency weakness, resulting in a low single-digit return. Against this backdrop, private equity returns were robust.
Global bond markets were down in FY13 as global monetary easing failed to overcome concerns about a prospective tightening of U.S. monetary policy. In the final quarter of the fiscal year, sovereign debt markets experienced significant declines.
Returns to real assets were mixed. Commodities indices suffered as metals prices fell sharply. Private equity energy and timber performed well. Returns in real estate varied widely by region and property type, but were modestly positive in the aggregate.
Compound annual returns over the last five and 10 years were 4.4 percent and 8.5 percent respectively, net of investment-management fees. The five-year results—which reflect losses during the financial crisis—are lower than the return necessary to support College spending and maintain the endowment’s purchasing power. Ten-year results exceeded this threshold and are strong relative to passive strategies. Over the last 10 years, the College’s well-diversified endowment has outperformed U.S. equity investments, represented by the S&P 500, as well as the 65 percent stock/35 percent bond portfolio (shown below). Alternative asset classes with higher long-term returns have contributed significantly to strong longerterm portfolio results.
Policy Portfolio and Strategy Going Forward
The Policy Portfolio established by the Wellesley College Investment Committee guides asset allocation with the goal of balancing long-term returns and risks. Over the last 15 years, the endowment has diversified into less-efficient market-asset classes, such as venture capital, distressed debt, energy, and commodities. The Investment Committee and Investment Office team regularly review the expectations upon which the Policy Portfolio is based, with the goal of refining the assets held in the Wellesley portfolio in order to provide optimal risk/return characteristics over the long run. In executing this investment strategy, the Investment Office team works to add value within asset classes through the selection of outstanding investment managers.
The table below details the Policy Portfolio and the actual asset allocation as of June 30, 2013.
Exposure to total long-term alternative assets was 58 percent of the portfolio, relative to a long-term target of 57 percent. Relative to the long-term Policy Portfolio targets, the endowment portfolio has a small under-weight to fixed income and over-weight to real assets and sufficient exposure to liquid investments to maintain the endowment’s financial support to the College’s operations and to provide for portfolio liquidity needs.
The Investment Office and the Investment Committee remain focused on long-term growth to ensure that the endowment continues to support the College’s mission. I believe that the College will be well served by its strategy of broad diversification across asset classes, geographies, and strategies, and by the excellent investment managers whom we employ.
Members of the College community with questions, suggestions, or thoughts about the management of the Wellesley College endowment are invited to contact me at any time.
Deborah F. Kuenstner
Chief Investment Officer