Endowment assets are pooled and managed externally by 12 institutional money management firms in accord with a well-defined strategic asset allocation established and monitored by the Committee on Investments of the University Board of Trustees. The remaining $300 million of investments consists of working capital assets, charitable trust funds, and other investment portfolios governed by separate mandates.

For the year ended June 30, 1998, the Endowment Investment Pool returned 20.5% ranking it in the top quartile of a peer group of institutional portfolios. The pool's strong performance is attributable in part to its allocation to domestic equities which averaged 45% of the fund's total assets during the fiscal year. In the past five years, the Standard and Poor's 500 Index has returned more than three times that of comparable bond indexes. The University has taken advantage of this added return through a purposeful reallocation of assets to U.S. equities. The pool's three-year average annualized return of 19.3% ranked in the top third of its peer group.

The pool's strong performance in fiscal 1998 was attributable in part to the performance of its fund's three large-cap, growth style equity investment managers, who collectively accounted for 24% of pool assets at year-end. Each outperformed the S&P 500 Index return of 30.3% for the year by significant amounts. Although its contribution to the pool's overall return has been reduced compared with prior years, the Special Investments portfolio also benefited from the strong U.S. equity market with a total return for the year of 53.3%. The international equity managers as a group marginally underperformed the relevant index, which had a return of 6.1%; however, this underperformance is solely attributable to two emerging markets managers appointed at the beginning of the fiscal year. These managers experienced losses in Asian investments. Each of the pool's two core international equity managers outperformed the index. The pool's fixed income manager has consistently outperformed the Lehman Brothers Government/Corporate Index over the past 10 years, ranking it in the top decile of all fixed income managers over this period.

While the pool's nominal performance is quite good, the Committee on Investments remains focused on the risk taken to achieve these levels of return. Accordingly, the pool's returns as adjusted for portfolio volatility are monitored regularly. For the seven-year period ended June 30, 1998, the risk-adjusted average annualized return of the pool ranked in the fourth percentile of its peer group, indicating that the pool outperformed 96% of its peer funds on the basis of the level of risk taken to achieve its nominal performance. In a further effort to control risk, the Committee on Investments decided to make a tactical reallocation among the pool's domestic equity managers during the last half of fiscal 1998. It replaced one of three large-cap growth managers with a large-cap value-oriented manager.

 
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