The School of Professional Studies in Business and Education (SPSBE) provides support systems and services tailored for working adult professionals who study part-time. Among these are student organizations. The latest one was created with the sponsorship of the school’s Office of Student Affairs and the Development of Information Technology. Three students in the Master of Science in Information and Telecommunication Systems program established a Hopkins chapter of the nationwide Association for Women in Computing. Specifically designed to help women at Hopkins to find jobs in the technology field or redirect their technology careers, the new group now has 15 members. “We needed guidance to help other students and alumni like ourselves,” says Cathy Clement, a founder of the group along with Suzette Johnson and Suzanne Innes. The group meets monthly, hears from speakers, networks with IT faculty and industry representatives, and is beginning a mentoring program. It even has its own Web site, http://www.awcjhu.jhu.org. “Our real mission is to empower women in technology,” says Clement, who will receive her MS in Information and Telecommunication Systems in May.

At June 30, 2001, the University’s total invested funds had a market value of $2,494 million. The bulk of these funds was held in the Endowment Investment Pool (EIP), which is comprised of assets of some 2,470 separate endowments, each owning shares in the EIP. While the assets of the individual endowments are pooled for investment purposes, each endowment continues to be accounted for individually to ensure proper compliance with donor restrictions. The balance of invested funds is made up of current funds (e.g., working capital, gifts intended for current use, foundation funds, and funds held under deferred compensation agreements) and charitable remainder funds.

The market value of the EIP at June 30 was $ 1,820 million, increasing by some $17 million during the fiscal year from its market value of $1,803 million at June 30, 2000. This increase in market value reflects the addition of about $120 million to the EIP, offset by the impact of the protracted decline in the domestic and international equity markets, which began in the spring of 2000.

The EIP asset allocation for the 2000 and 2001 fiscal years is shown in the accompanying table. The increased allocation to alternative investment strategies reflects actions taken as a result of the Investment Committee’s comprehensive review of asset allocation and long-term strategy for the endowment pool. As a result of that review, the committee decided to increase its allocation to marketable alternative investments, specifically absolute return strategies. Absolute return investing seeks to generate equity-like returns with lower volatility than the equity markets and low correlation with those markets. Absolute return strategies seek to exploit pricing inefficiencies in marketable securities. The current asset allocation reflects the increased allocation to absolute return strategies, effectively doubling the allocation to this asset class at June 30, 2000. The first allocation to the asset class was made in fiscal year 2000. The increased allocation in fiscal year 2001 was funded with net cash inflow to the EIP.

With respect to non-marketable alternative investments, the review led the committee to increase its target allocation to venture capital and buyout funds, from 10% to 15% of the EIP, recognizing that the higher target allocation will take five to six years to fully implement. In its continuing effort to increase the share of endowment assets allocated to venture capital and buyout funds, the University committed an additional $31.3 million to five limited partnerships in the 2001 fiscal year. The decline year over year of the percentage allocated to the asset class reflects market value adjustments associated with the decline in technology over the last year, as well as significant net distributions from the limited partnerships in the early part of the fiscal year.

The decline in the allocation to international equities reflects the decline in the value of those assets as a result of market performance. As noted below, international equities were the worst performing asset class in the endowment pool. The decline in the allocation to international equities also reflects a decision by the Investment Committee not to add funds to the asset class.

The other year-to-year changes in asset allocation reflect changes in market value. Aside from alternative investments, domestic equities were the only asset class to which additional net cash inflow was allocated during the year.

As noted above, fiscal year 2001 was a very difficult year for both domestic and international equity managers. During the fiscal year the S&P 500 U.S. stock benchmark declined 14.8%, and the MSCI EAFE international stock index declined 23.8%. At the same time, after declining during the first half of the year, the Lehman Government / Corporate Fixed Income Index had a positive return of 11.1% reflecting falling interest rates and rising bond prices resulting from the aggressive easing of the federal funds rate and the discount rate by the Federal Reserve in the second half of the fiscal year.

In this context the EIP had a total return of –1.1% for the year ending June 30, 2001. The strong performance of the endowment pool relative to the major stock indices highlights the importance of a broad diversification by asset class. Combined, the fixed income managers had a return of 13.3%, which significantly outperformed the benchmark and contributed significantly to overall performance. In addition, the marketable alternative funds as a group generated returns of 10.6%, also helping overall performance. Importantly, the combined returns of domestic equity managers of –4.5% significantly outperformed the S&P 500, thereby dampening the impact of negative returns in the equity markets. This strong relative performance of the domestic equity portfolio reflects the importance of diversification within an asset class. Domestic equities have been allocated roughly equally to growth and value styles of investment.

As noted above, international equities were the worst performing asset class during the fiscal year, and the University’s international equity assets were no exception. Still, our managers as a group managed to outperform the MSCI EAFE Index by a small margin. Finally, non-marketable alternative investments, that is, venture capital and private equity investments, were the best performing asset class with returns of 31.8%. Effectively, the benefits of broad diversification significantly dampened the negative impact of declining equity markets worldwide.