Northwestern Endowment

September 20, 2022
By AdmissionSight

Northwestern Endowment

What is the current Northwestern Endowment? The year 1851 marked the beginning of Northwestern University as an educational institution, and from the very beginning, the Board of Trustees has been tasked with the responsibility of managing the university’s assets in a manner that they believe will be most advantageous to the university.

The Northwestern endowment was formed so that it would always be able to serve as a source of financial support for the mission of the university. The Northwestern Endowment generates a considerable stream of income from its investments, which is used to finance current expenses for practically every aspect of University life, including scholarships, teaching, research, and facilities across all global campuses.

In addition, the Endowment’s contribution to the University’s mission continues to grow as a result of the appreciation of investments and the generous gifts of donors. This growth is reflected in increased funding for increased financial aid, new research initiatives, and the addition of talented faculty members, all of which contribute to elevating the University’s status as a top-tier educational institution for both the generations of today and the generations of the future.

The Board of Trustees, in their capacity as fiduciary stewards of the University’s Endowment, are constitutionally expected “to manage and invest the Endowment in good faith and with the care, an ordinarily competent person in a similar position would exercise in like circumstances.”

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This rule, which is more commonly known as the “prudent investor” rule, stipulates that when the Trustees are managing the assets of the University, they must take into account, to the extent that it is relevant to do so, general economic conditions, the role each investment plays within the overall investment portfolio, the expected total return from investment income and the appreciation of investments, as well as the needs of the institution for current distributions and the preservation of capital. In other words, they must be prudent investors.

How much is the Northwestern Endowment?

How much is the Northwestern Endowment? According to a report published in December, the value of Northwestern University’s net assets climbed to more than $16 billion during the fiscal year 2021.

The NU 2021 Financial Report reveals significant expansion in a variety of operational sectors. The amount of money given to sponsored research hit an all-time high of $893.4 million, which is a 74% increase from ten years ago.

In addition to this, the report noted the successful completion of the We Will fundraising campaign, which was an initiative organized by Alumni Relations and Development. The fundraising effort came to an end this year after amassing $6.1 billion in contributions from more than 170,000 backers, thereby exceeding its initial goal of $3.75 billion.

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According to the study, the Northwestern endowment generated a return of 37% over the course of the previous year. In an interview with The Daily that took place in October, University President Morton Schapiro stated that one of his primary goals in his remaining year at the helm of the University is to continue strengthening the University’s financial position in preparation for his recently-named successor Rebecca Blank’s transition into office.

Schapiro is quoted as saying, “I want to make sure the budget is in good shape.” “She’s going to have some strong feelings. I want her to be in a position where she has access to funds that she can use right away to invest in the things that are most important to her.

Amy Falls, Vice President and Chief Investment Officer of NU, stated that as a result of the endowment’s expansion, the university now enjoys an above-average financial position. Falls expressed to The Daily her happiness that NU was able to share in the success of other comparable schools’ endowments in 2021, saying that she is delighted that NU was able to contribute to that success.

According to Falls, the growth of NU’s venture capital portfolio over the course of the previous year made it one of the most significant contributors to the success of NU’s endowment. The university is actively investing in a wide variety of fields, such as software and application development, biotechnology, technology for transitioning to a more sustainable climate, and cryptocurrency technology.

Falls said that this past year was one of their most successful. “I’m extremely satisfied with how well the endowment did, and I’m also extremely satisfied with how well we’re positioned (for the future)”

She stated that the University will be modifying its investments in the near future in order to start decreasing risk and begin orienting itself toward longer-term aims. In the previous year, venture capital accounted for around 35 percent of the University’s endowment. Falls indicated that she would prefer that this number be closer to 20%, but acknowledged that the shifting process will take some time.

According to the report, the University maintained a considerable operating surplus of $87.8 million, and Schapiro stated that he would like to see this excess reflected in the capital budget. According to him, that money can be put to use to hire additional personnel, increase compensation for both teachers and staff, fund information technology, and expedite the Jacobs Center redevelopment project.

Executive Vice President Craig Johnson expressed gratitude to the Northwestern community in the report’s introduction for their contributions to the university’s continued financial performance and stability despite the COVID-19 pandemic.

“The exceptional efforts and resiliency of our faculty and staff working under considerable constraints made it feasible for Northwestern to manage such operational and financial uncertainties,” said Johnson. “This was made possible by the fact that Northwestern is able to do so.” Our community showed a lot of passion and entrepreneurial spirit in response to the cost-cutting measures that were implemented.

What is an Endowment?

What is an Endowment? In the decades that have passed since the year 1851, when Northwestern University was established, alums, parents, and friends of the university have generously supported the institution’s efforts to provide an education that is unrivaled and to conduct research that is at the forefront of a variety of important fields. When a donation is given with the intention of going to the Northwestern Endowment, Northwestern assumes the responsibility of seeing to it that the money is used appropriately and that it continues to be used for the same reasons it was given.

The Investments Committee of the University’s Board of Trustees is in charge of managing the Endowment Fund. The University’s Investment Office invests money into a pool of assets that is very diverse, following the policies that were established by the committee. Many of the world’s most successful outside managers for public equities, fixed income, absolute return, private equity, and real asset strategies are employed by the Investment Office in order to handle the majority of the Endowment’s investments. These strategies include real assets, private equity, and absolute return.

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The remaining portion of the Fund, which is around nine percent, is directly managed by the Investment Office inside the organization, primarily within the Fixed Income portfolio. The Investment Office has a total of 22 employees on its payroll, eight of them hold the designation of Chartered Financial Analyst.

The 1851 Charter of Northwestern University establishes both a company and a Board of Trustees with “perpetual succession.” The Charter grants the Board the authority “to acquire, own, and convey property…solely for the purpose of education.” In addition, the Charter gives the Trustees the authority to “put out at interest, or otherwise depose of “property” for the use of said institution in such a way that seems most beneficial to them.”

To “advise the Board of Trustees with respect to investment and Northwestern endowment, trust, and general funds of the University,” the By-Laws of the Board of Trustees establish an elected Committee on Investments. This Committee is also tasked with “developing and recommending…policies relating to such investments” and “authorizing by resolution all appropriate actions by the officers or agents of the University” (Investment Office).

The Prudent Investor Rule is one of the rules that apply to trustees in general, and those standards must be followed by the University’s board of trustees. The trustees have an obligation to “exemplify the skill and prudence that an ordinarily capable and diligent individual would employ in the management of his own business of a similar type,” according to the law. When it comes to the actual process of investing trust assets, the Trustees are required to “use the care and skill of a fairly responsible investor.”

What Investment Firm handles Northwestern Endowment?

What Investment Firm handles Northwestern Endowment? The Investment Office at Northwestern University serves as custodian of the Northwestern University Endowment in order to provide a steady and rising source of income to fund the University’s academic and research goals for both the present generation and future generations.

The Investment Office will be known all over the world for having portfolios that perform at the very highest levels and for taking a deliberate, long-term approach to invest. Because of its stellar reputation, solid investment methods, and rock-solid team, it will be the partner of choice for investment managers who are at the top of their game.

The Board of Trustees at Northwestern University issued a statement in 2019 reiterating the institution’s dedication to the prudent management of its Northwestern endowment and the upholding of core University values in its investment practices. The statement was issued in response to a question from the Board of Trustees.

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The University is an important institution in terms of its function in promoting debate and discussion on topics of societal significance and issues pertaining to human welfare. In order to maintain its status as an objective institution, the University does not, as a rule, take a stance on any particular political or social concerns.

In a similar vein, the Trustees are of the opinion that the Endowment should not be utilized as a tool to advance certain political or social stances or agendas. The Trustees are of the opinion that the most important function of the Endowment is to supply the necessary financial assistance to the University so that it can continue to fulfill its goal both today and in the future.

The Trustees are aware that it is important to the endowment’s long-term worth to take ethical issues into account when making investment decisions and that this is something they actively pursue. The Trustees are of the opinion that it is essential to take into account fundamental developments in social values and to investigate the ways in which such shifts may influence the continued desirability of an investment. As a result, the Trustees are under the impression that throughout the course of time, the investment portfolio of the Endowment will, to a reasonable extent, reflect these changes.

In 2016, the University of Northwestern became a signatory to the Principles for Responsible Investment, which are supported by the United Nations and encourage the incorporation of environmental, social, and governance (ESG) issues into the investment process. This was done as a public demonstration of the university’s commitment to responsible investing.

In addition, in 2016, the President of Northwestern University and the Chief Investment Officer of the University, with the support of the Investment Committee of the Board of Trustees, established the Advisory Committee on Investment Responsibility (ACIR) to act as a conduit for members of the Northwestern community to present specific investment-related concerns to the Investment Committee for consideration. This was done with the goal of allowing the Investment Committee to better serve the Northwestern community’s needs.

Where is Northwestern Endowment Invested?

Where is Northwestern Endowment Invested? In most cases, the Endowment does not make direct investments in stocks, bonds, or other assets that are similar. Instead, the Investment Office is responsible for selecting suitable third-party investment managers, who are then tasked with making, holding, and ultimately selling specific investments on behalf of the Endowment.

Because the majority of the University’s holdings are handled by third-party investment managers, who are in charge of picking particular investments, the University’s influence as an active shareholder is restricted. When selecting investment managers, the Investment Office does a thorough investigation of each candidate’s honesty, morality, and guiding principles, as well as the extent to which each candidate takes environmental, social, and governance considerations into account when making and holding investments.

Female student typing in her laptop.

The Trustees think that the latter are key considerations in the process of selecting a manager for the Endowment since these variables can lead to investments in companies that have more sustainable business models and to greater long-term risk-adjusted returns.

The Board of Trustees is of the opinion that in most instances, divestment from the University’s Endowment is an ineffective means of exercising investment responsibility. This is especially true when compared to the value of encouraging members of the University community to participate in educational pursuits, research endeavors, and intellectual discourse.

However, the Trustees are aware that, on extremely rare occasions, a continued investment may be so morally repugnant — for example, investments that directly support slavery, apartheid, or genocide — that such an investment would necessitate the University’s divestment from the company. In these cases, the University would be required to sell its holdings in the company. Because the Trustees are aware that choices about a single asset should not be made in a vacuum, each of these occurrences will be evaluated on an individual basis and considered separately.

The extent to which the proposed divestment would generate tangible and positive change with regard to the issue at hand, the ease with which an investment may be unwound, as well as the financial impact the proposed divestment would have on the Endowment and its financial support of the University will all be factors that the Trustees will take into consideration.

In order to move forward with any proposed divestment, there would need to be widespread and comprehensive support from the various constituencies of the University. This requirement guarantees that the University continues to cultivate a community that encourages the free and open discussion of ideas, which is essential to the fulfillment of the University’s mission.

In conclusion, the Trustees are of the opinion that the most appropriate forum for tackling large social, ethical, and political issues within the arena of the University is through research, education, and critical debate that takes place in an environment that allows academic freedom. In addition, the Trustees are of the opinion that the Endowment can be of the greatest benefit and have the most significant influence if it continues to provide financial assistance to the University.

However, this assistance can only be maintained if the emphasis is placed on achieving the highest possible long-term returns. In general, when considering matters pertaining to investment policy, the Trustees will be guided by their fiduciary duty to steward the University’s Endowment for current and future generations in a manner that is consistent with the University’s commitment to excellent teaching, innovative research, and the personal and intellectual growth of its students within a diverse academic community. This duty requires the Trustees to make decisions that are in line with the University’s commitment to excellent teaching, innovative research, and the personal and intellectual growth of its students within

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