2019-2020 Denison Endowment Report

ENDOWMENT PERFORMANCE 2019-20 “ D enison’s endowment, which has grown to more than $914 million this year, has given the college a distinct advantage over most other independent liberal arts institutions This is especially true when considering the onerous fnancial strains on higher education caused by the current global pandemic The cost of providing a safe and healthy environment for living and learning has increased dramatically And at the same time, many families’ ability to pay for their student’s college education diminished as a result of coronavirus Many good schools, especially those highly dependent on tuition dollars, have found it increasingly difcult to deliver their students and faculty the support they need By contrast, with its high endowment per student, Denison has continued to maintain and increase that support throughout this challenging period From research to athletics “ Attending college to the arts and beyond, our college continues to can make a huge thrive Especially notable is Denison’s ability to diference in a provide crucial fnancial aid and exceptional person’s life, but career resources when they are needed most attending a place Success breeds success, and Denison is currently like Denison can experiencing unprecedented success in the area something extraordinary ” of admissions, which is another distinction that few colleges can claim these days Ebony ’20 All of these achievements are clearly the direct result of your investment in Denison’s endowment, and we all are exceedingly grateful T he Denison endowment consists of approximately 1030 individual endowed funds, many of which carry donor restrictions Donor restricted endowments generally are made so that annual income earned by the gift can support a specifc activity such as fnancial aid to students or to support an academic department or professorship in perpetuity While some endowments are restricted as to their use, others are given without restrictions The endowment also holds funds designated by the Board of Trustees to act as endowment, the income on which is used to support University needs However, Board designated endowment (or quasi-endowment as it is sometimes called) is unrestricted as to purpose The Board may vote to spend the principal portion of quasi-endowment at any time Endowment and quasi-endowment funds are invested together with University capital reserves and other smaller pools of capital in the University’s Long Term Investment Pool (LTIP), which is managed by the Denison Investment Ofce For investment purposes, individual endowment funds are treated as one pooled fund, and they own units (or shares) in the pool, similar to a mutual fund A t June 30, 2020, the Long Term Investment Pool was valued at approximately $914 million The components of the LTIP are shown in the table below MARKET VALUE OF THE LONG TERM POOL Endowment 582,420,200 Board Designated / Quasi Endowment 235,852,154 Capital Reserve Funds 91,501,979 Charitable Annuities 2,055,100 Denison University Research Foundation 2,474,094 $914,303,527 INVESTMENT GUIDELINES Investment Office staff operate under a delegation of authority from the Board of Trustees and the Investment Committee of the Board The governance structure and the principal investment guidelines are set forth in an Investment Policy Statement (IPS) approved by both the Investment Committee and Board The IPS sets forth the overall investment objectives and guidelines to be observed in managing the LTIP assets and provides a framework for both the Investment Committee and Investment Office staff within which to operate The IPS also sets forth the most recently approved Policy Portfolio, which identifies the asset class target weights and target ranges approved by the Board ASSET ALLOCATION A primary objective in the IPS is to maintain a welldiversified portfolio Investing across multiple asset classes is the key to growing the endowment and managing risks appropriately The Policy Portfolio supports this by calling for investments to be allocated across major asset classes Over the long run, the allocation of the portfolio among these asset classes may be the single most important determinant of the fund’s investment performance As of June 30, 2020, the Policy Portfolio refected the following target allocation to the major asset classes: Cash: 2% Fixed Income: 3% Public Equities: 22% Absolute Return: 41% Private Equity: 20% Real Assets: 12% PORTFOLIO PERFORMANCE The return on the LTIP as of June 30, 2020, is as follows These fgures are annualized and represent the net return, after taking into account investment manager fees and expenses The policy portfolio is a weighting of the individual asset class benchmarks approved by the Board of Trustees as part of the policy portfolio, which is documented in the Investment Policy Statement year LTIP 4.8 Policy Benchmark 0.5 diference 4.3% year year 10 year 7.8 5.9 8.9 5.1 4.9 7.2 2.7% 1.0% 1.7% SPENDING RULE The Board of Trustees has established an endowment spending policy that attempts to achieve the proper balance between supporting the University’s present and future needs – i.e., supporting current students and annual operating budgets while preserving the real value of the endowment and its long term purchasing power to support future generations The current spending rule provides an annual cash fow to the operating budget This operating cash fow is determined under a calculation of spend per unit of the LTIP, which is weighted 70% on the infation adjusted level of the prior year’s spending level and 30% on a market value of the endowment at a 5% spend rate “ Your generosity allowed me the opportunity for a summer internship that gave me a sense of direction and purpose as I enter my senior year I have been continually astounded by the support and generosity of the Denison community My internship experience is another story I get to share when people ask me why the family of Denisonians is so special to me I am so looking forward to the day where I can support future Denisonians the way you have supported me Thank you! ” Abby ’21 ... MARKET VALUE OF THE LONG TERM POOL Endowment 582,420,200 Board Designated / Quasi Endowment 235,852,154 Capital Reserve Funds 91,501,979 Charitable Annuities 2,055,100 Denison University Research Foundation... astounded by the support and generosity of the Denison community My internship experience is another story I get to share when people ask me why the family of Denisonians is so special to me I am so... year 7.8 5.9 8.9 5.1 4.9 7.2 2.7% 1.0% 1.7% SPENDING RULE The Board of Trustees has established an endowment spending policy that attempts to achieve the proper balance between supporting the University’s