by Jeff Bendix

Everyone knows that the three keys to success in real estate are "location, location location." When it comes to Case Western Reserve University and its endowment in recent years, success has meant "allocation, allocation, allocation."

For the 2003 fiscal year, the University's unaudited total endowment stood at $1.32 billion. Before subtracting about $76.3 million in payouts to the University's operating budget, that is a 2.4 percent total return for the year. By comparison, the benchmark against which the University measures itself was up 0.6 percent during the same period, and the Standard & Poor's stock index was down 11.2 percent.

"We had a decent year considering it was the tail end of the worst stock market
in 25 years," said William Rose, University treasurer and chief investment officer. "The lingering question for the last few years has been that we know we've been able to do well when the markets are going down, but how will we fare when the markets turn around?"

Rose attributes the endowment's relatively strong performance to the ongoing reallocation of its investments; moving out of stocks and into alternative investments, which includes instruments such as hedge funds and private equity; and real assets including investments in real estate and bonds indexed to inflation.

These shifts contributed to a compound annual three year return of -1.9 percent for the University's combined endowment, compared to -5.3 percent for the benchmark. The pooled fund did considerably better losing only 1 percent per year for the three-year period ending June 30, 2003.

The pooled endowment is managed by the University's investment committee. The combined endowment is made up of the pooled endowment plus the unpooled endowment, which is managed by other advisers as well as outside trusts from which the University receives income, deferred gifts and the endowment of the Case Alumni Association.

Return to the online edition of the 8-21-03 Campus News.

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