USC Endowment

What is the current USC Endowment? The University of Southern California first opened its doors in Los Angeles in the year 1880, at a time when the city lacked even the most fundamental facilities, such as paving stones and electric light, and long before it became the flashy capital of the motion picture industry.

In spite of the fact that a judge by the name of Robert Maclay Widney and a number of other local residents shared their vision, it took them close to ten years to see their plans for a university in the area come to fruition. It was eventually made possible thanks to the donation of land from a diverse group of philanthropists, including a Protestant horticulturist, an Irish pharmacist (and former governor of California), and a German-Jewish banker.

Even though it only had 53 students when it first opened its doors, the University of Southern California has since developed into a research institution that is recognized all over the world and is the largest private employer in its city. Now, the nearly 4,000 members of the faculty are dispersed across 21 distinct schools and groups.

Although the main campus is located in the middle of Los Angeles, the three teaching hospitals, as well as the Schools of Medicine and Pharmacy, are clustered together on a separate site for the Health Sciences located to the north of the city. Cancer, stem cell research, regenerative medicine, and sports medicine are among his areas of expertise. The Keck School of Medicine at the University of Southern California plays an important role in the city’s children’s hospital.

One of the five people who have been awarded the Nobel Prize in Physics is Murray Gell-Mann, a physicist who proposed the idea of quarks and gave them their names. Since 2011, the institution has been home to a School of Cinema Arts, which has produced a number of graduates who have gone on to achieve significant success in the entertainment industry. These graduates include Hollywood actors John Wayne and Clint Eastwood, as well as film director George Lucas. Equally impressive is the accomplishment of astronaut Neil Armstrong, who was the first human to set foot on the moon.

The university’s academic programs receive significant support from the USC endowment, making it an essential source of funding for those programs. USC adopts investment and spending policies geared to sustain the USC endowment asset values while producing a large flow of revenue in order to strike a balance between the requirements of the present and those of the future. The balance of the USC endowment was $5,914 million as of June 30, 2020, but as of June 30, 2021, it had increased to around $8,126 million, representing a growth of approximately $2.2 billion, or 37 percent, from that date’s endowment balance.

How much is the USC Endowment?

How much is the USC Endowment? The USC endowment saw a return of 43.2% for the fiscal year that concluded on June 30 thanks to the investment portfolios managed by the university. The returns that USC received brought its endowment’s asset value up to just over $8 billion by the time the fiscal year came to a close.

USC’s return of 43.2% was higher than the combined 70% MSCI All Country World Index/30% Bloomberg US Aggregate Bond Index as well as the 5% increase in the Consumer Price Index (CPI) across the short, medium, and long terms. The endowment reportedly generated annualized returns of 13.7%, 9.9%, and 8.2% during the course of 5, 10, and 20 years, respectively. During the same time periods, the annualized returns on the 70/30 benchmark were 11.3%, 8.1%, and 6.8%, while the annualized returns on the CPI plus 5% benchmark were 7.4%, 6.9%, and 7.4%, respectively.

The current asset allocation for USC’s portfolio is as follows: 45.5% is invested in global equity, 18.4% is invested in venture capital, 9.4% is invested in absolute return, 8.4% is invested in private equity, 5.6% is invested in natural resources, 5.2% is invested in fixed income, 4.4% is invested in real estate, and 3.2% is held in cash.

The USC Investment Office stated in the endowment’s annual report that the institution follows “a long-term and aggressive investing methodology that responds to changing circumstances and takes advantage of valuation extremes.” This strategy is intended to enable the endowment to grow in real terms, delivering meaningful annual returns that are at least equal to the rate of inflation, all while reducing the risk and volatility of the investment.

What is an Endowment?

What is an Endowment? A collection of assets that have been invested by a college or university to provide ongoing financial support for the institution’s educational and research endeavors is known as an endowment. It is a binding agreement between a donor and an institution that connects generations of the past, the present, and the future. These gifts also make it possible for an organization to make commitments that extend very far into the future, secure in the knowledge that the resources necessary to fulfill those commitments will continue to be accessible.

In reality, an institution’s endowment is made up of the combined contributions of hundreds or even thousands of individuals. Donors are able to move their personal funds to public causes through the use of endowments, with the knowledge that their gifts will continue to contribute to those causes for the duration of the institution’s existence.

Donors who have stipulated as a condition of the gift that its principal may not be spent typically contribute funds to an institution in order to establish an endowment. These donors have the expectation that the value of the endowment will increase over time as a result of a responsible balance between the expenditure and reinvestment of the earnings of the endowment.

When a donor gives money, they often stipulate that it can only be used for one or more specific reasons; if this is the case, the organization must use the money exclusively for the specified goals. In some instances, the donor will allow the organization free reign to choose the educational goals it will work toward, but the organization will be confined to spending only what it brings in financially.

Supporters are able to provide stable streams of money for the people, programs, and activities that are important to them and that they want to see flourish as a result of their contributions to the endowment at USC. An endowment continues to exist forever as a result of the principal being invested for the purpose of generating long-term growth. Every contribution to the endowment, regardless of how little, will enable the University of Southern California to accomplish our most important objectives in the years to come and leave an imprint on future generations.

Donations to the USC endowment are placed in the Endowment Fund of the University of Southern California, which is a well-balanced portfolio that invests in a variety of asset types. The institution adopts a long-term, proactive investing methodology that responds to changing conditions and capitalizes on valuation extremes because it is aware that market volatility and economic change present both dangers and possibilities. This strategy is meant to enable the endowment to expand in real terms, delivering considerable yearly returns that are at least equal to the rate of inflation, all while reducing the risk and volatility of the investment.

It is the responsibility of the Office of Stewardship and Donor Relations to provide annual reports to the donors of named endowed funds. These funds must have been established with gifts of at least one hundred thousand dollars. These reports on endowments contain useful financial information about the endowed fund, including the book value, the market value, the expenses, and the revenue that can be spent.

When applicable, the reports include the names of the individuals who have benefited from a particular fund. These individuals may include those who have been awarded a scholarship or fellowship, as well as chairs and professors.

USC endeavors to demonstrate its commitment to transparency and accountability by publishing these reports on an annual basis. It is essential to the proper management of these significant and vital donations to keep donors informed about the individuals and programs that will be helped by the assistance of named endowed funds.

Return on investment for the endowment was 43.2% for the fiscal year that ended on June 30th, 2021. The programs dealing with venture capital had the greatest outperformance of any of the investment programs. The endowment generated an annualized return of 9.9 percent over the past decade, which compares favorably to a benchmark consisting of 70 percent global equities and 30 percent global bonds, which provided an annualized return of 8.1 percent.

What Investment Firm handles USC Endowment?

What Investment Firm handles USC Endowment?  Each organization develops its own strategies and governing policies in order to maximize the ability of its endowment to cover both current expenditures and future requirements.

Some organizations choose to utilize their own staff to oversee the management of their endowments, while others opt to delegate this responsibility to their trustees, hire outside professional administrators, or combine both strategies. While some financial institutions strive to achieve the highest possible level of income, others prioritize maximizing their overall return.

The USC Financial Office is responsible for the management of all investment assets, including the Endowment Fund. The Investment Committee of the Board of Trustees is responsible for providing oversight. The Investment Committee is responsible for formulating the USC Endowment Fund Asset Allocation Policy with the intention of increasing returns while maintaining risk levels that are deemed acceptable.

This Asset Allocation Policy is put into action by the Investment Office, which is responsible for selecting and supervising the work of external asset managers and advisors. USC lowers its overall portfolio risk by diversifying both its managers and their investment strategies. This is accomplished by investing the Endowment Fund with outside managers. This enables the knowledgeable group of specialists working in the Investment Office to maximize the benefits of diversity while minimizing investment risk.

USC Endowment contributions are placed in the Endowment Fund at the University of Southern California. This fund is a balanced portfolio that invests in a variety of asset classes, such as global stocks and bonds, real estate, natural resources, private equity, venture capital, and absolute return strategies. Gifts to the endowment are used to grow the fund.

The institution adopts a long-term and active investing methodology that responds to changing conditions and capitalizes on valuation extremes because it is aware that market volatility and economic change present both dangers and possibilities. This strategy is meant to enable the endowment to expand in real terms, delivering considerable yearly returns that are at least equal to the rate of inflation, all while reducing the risk and volatility of the investment.

Where is USC Endowment Invested?

Where is USC Endowment Invested? Before the turn of the twentieth century, the majority of educational institutions’ endowments consisted mostly of real estate. The majority of today’s endowments put their money into illiquid assets such as hedge funds, real estate, stocks and bonds issued in the United States and other countries, and stocks and bonds issued in the United States.

The trustees are responsible for a variety of duties, one of the most significant of which is to monitor the administration of the institution’s assets as well as their distribution. In the management of investments, trustees are required by law to use caution, but they should also make every effort to earn a return that is as considerable as possible given the need to exercise caution in this area.

The spending policy for the endowment, which determines how much of the earnings from the endowment are put back into operations, strikes a balance between the conflicting goals of maintaining a consistent flow of income and guarding the endowment’s long-term worth.

By utilizing a long-term target spending rate in conjunction with a smoothing mechanism, which adjusts expenditure in any given year gradually in response to changes in endowment market value, the spending strategy successfully handles the trade-off between these two goals. According to the spending rule, the income and realized gains from the endowment are divided up and allocated for current spending. However, the rule stipulates that any amounts that are left over after the allocation must be transferred to the endowment pool and reinvested there so that they can continue to serve as endowment funds.

The Board of Trustees gave its approval to the current distribution for the 2021 Fiscal year, which was set at 103 percent of the payout from the previous year. This percentage fell between a minimum of 4 percent and a maximum of 6 percent of the average market value for the preceding 12 calendar quarters.

In accordance with the terms of the spending rule, a sum of $31.24 was allotted to each time-weighted unit, bringing the total amount of money allotted by the spending rule to $276.2 million. The cumulative gains from pooled investments resulted in an investment income of $3.55 per time-weighted unit, which amounted to a total of $31.4 million, and $244.8 million was allotted for use in ongoing operations from those gains. Earnings from the endowment pools that are designated for spending in the fiscal year 2021 constitute 3.62 percent of the endowment pools’ market value as of the 30th day of the fiscal year 2021.

The USC endowment employs investment techniques that give varying degrees of liquidity and has a long-term investment horizon as its focus for its financial planning.

The asset allocation strategy utilized by USC reveals that the endowment’s asset allocation, as well as the individual policy weights as of the 30th of June in 2021 Investments made by the University of Southern California endowment in growth assets such as global equity, venture capital, and private equity, are essential to the fund’s ability to generate long-term returns. The inclusion of investments in global fixed income is done so as to offer both diversification and liquidity; on the other hand, the goal of absolute return is to reduce volatility in times of tumultuous market conditions. Real estate and natural resources offer exposure to long-term growth potential while keeping some susceptibility to inflation. Cash is used to satisfy financial obligations for the requirements of daily operations

The purpose of the endowment is to contribute to the fulfillment of the educational goals of the university for both the current and future generations of Trojans. Because it is anticipated that the endowment will continue to function forever, the decisions about investments will be focused on the long term.

USC is continuing to place an emphasis on generating returns and diversifying its portfolio. Because an equity focus is sensible for investors with long-term objectives, the University of Southern California’s investment strategy continues to be guided by these ideas. Both the equity focus of the USC endowment and its highly diversified portfolio should equip the endowment to be successful as an investor over the long term.

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