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Endowment Performance

MSU Common Investment fund (cif) Report and Comparative Endowment Performance

The MSU Endowment was valued at $2.7 billion as of June 30, the end of the 2016/17 fiscal year. Over the past ten years, the endowment produced more than $856 million to fund student scholarships, endowed professor support, program support, and cover other annual university expenses.

For the fiscal year ending June 30 we returned 16.2 percent, above the median return of our peers. Our long term performance remains above the median of our peers and has continued to allow us to meet our funding obligations to the university.

  1 YEAR 3 YEARS
Annualized
5 YEARS
Annualized
10 YEARS
Annualized
MSU Common Investment Fund 16.2% 4.8% 8.5% 5.1%
Median College and University Endowment (1) 13.0% 4.8% 8.3% 4.7%

Investment Objectives of the CIF

  1. Achieve a total rate of return sufficient to generate the amount annually made available for spending by the MSU programs supported by endowment funds.
  2. Provide a modest increase in the inflation-adjusted value.
  3. Achieve the desired return while assuming only moderate risk.

Read a message from Chief Investment Officer Philip Zecher to learn about MSU’s endowment management approach.

Endowment Spending Policy

The programmatic spending rate currently stands at 4.6 percent of a 20 quarter average of the market value of those funds invested in the CIF. The spending rate is reviewed annually against the projected long-term CIF returns and the impact of inflation and was reduced from 4.8 percent in 2017. The rate is intended to protect against inflation and provide a modest increase for endowment growth.

Reasonable and appropriate investment fees will continue to be charged against the endowment. On December 10, 2010, the MSU Board of Trustees amended the endowment spending policy to authorize annual assessments of up to 1 percent of the market value of these endowments in the CIF for reasonable and appropriate endowment stewardship costs, including fundraising. Based on recommendations of the Investment Advisory Subcommittee, an endowment stewardship charge of .59 percent of the available 1 percent was implemented in the 2011/12 fiscal year, and the charge remained unchanged through the 2015/16 fiscal year. The stewardship charge was reduced to .55 percent beginning in the 2016/17 fiscal year.

A reduction of the spending rate to 4.4 percent, and a corresponding reduction in the stewardship charge to .50 percent for fiscal year 2019 have been approved by the MSU Board of Trustees.

Returns above the programmatic spending rate and investment and stewardship charges are retained to grow the endowment and hedge against inflation. Based on MSU’s investment performance, a $100,000 endowment established July 1, 1997, now has a market value of approximately $183,212 as of June 30, 2017, after having provided programmatic spending distributions of $154,221 over the 20-year period.

Asset Allocation

MSU seeks to achieve its investment objectives by diversifying across major asset classes as well as within each asset class. The investment policy, approved by MSU’s Board of Trustees, outlines the asset allocation. Approximately 240 different investment vehicles are now used to invest the funds. Cambridge Associates serves as MSU’s investment consultant.

Chart of endowment CIF asset allocation

Endowment Size and Comparison

Chart of total endowment market value (MSU and MSU Foundation)
Chart of endowment market value across the Big Ten

Benchmark Returns

TABLE 1: ANNUAL RETURN

MSU Common Investment Fund and Key Economic Indicators
Annualized return MSU commom investment fund vs. key economic indicators.
  MSU CIF 70/30(2) CPI-U(3)
2008 1.6% -4.0% 5.0%
2009 -17.5% -18.9% -1.4%
2010 11.3% 11.8% 1.1%
2011 21.3% 22.4% 3.6%
2012 -3.2% -1.6% 1.7%
2013 12.1% 11.6% 1.8%
2014 17.1% 17.6% 2.1%
2015 3.7% 1.5% 0.1%
2016 -4.3% -0.3% 1.0%
2017 16.2% 12.8% 1.6%

TABLE 2: ANNUAL RETURN

MSU Common Investment Fund and Peer Institutions
Annualized return MSU commom investment fund vs. peers.
  MSU CIF Big Ten Mean Peer Institution Mean(1)
2008 1.6% -3.2% -2.5%
2009 -17.5% -21.2% -20.3%
2010 11.3% 12.8% 12.3%
2011 21.3% 22.4% 21.1%
2012 -3.2% 0.0% 0.6%
2013 12.1% 12.1% 11.6%
2014 17.1% 16.7% 16.5%
2015 3.7% 3.1% 3.6%
2016 -4.3% -1.9% -2.5%
2017 16.2% n/a 13.0%

The CIF 10-year annualized return was 5.1%, the 70/30 10-year annualized return was 4.3% and the CPI-U 10-year annualized return was 1.6%. For quarter by quarter investment return information and copies of MSU’s investment policies, please visit the MSU Investment Office website.

For More Information

For more information on the investment of MSU’s CIF and related endowments, please contact Dr. Philip Zecher, chief investment officer of the MSU Investment Office at (517) 355-5018.

If you would like more information on establishing a new endowment through a gift to MSU, please contact Marty Heil, vice president for University Advancement, at (517) 884-1000, or contact the development officer in the unit you wish to support.

 

FOOTNOTES:
(1) Per Big 10 + Peer Benchmark Survey compiled by The Pennsylvania State University Office of Investment Management
(2) 70% Morgan Stanley Capital Int’l All Country World Index/30% Bloomberg Barclays US Aggregate Bond Index
(3) CPI-U = Consumer Price Index for All Urban Consumers