News > September 7, 2006

By Rachel Davis-Johnson

Staff writer

The university’s endowment fund has surpassed the $1 billion mark for the first time ever, according to final performance results at the conclusion of the fiscal year ending on June 30.

Wake Forest’s return rate of 12.4 percent from investments placed in the 13th percentile of about 770 universities, according to last year’s annual study by the National Association of College and University Business Officers (NACUBO).

Results for the fiscal year 2006 will come out in January. Due to the university’s large jump to 17.5 percent, according to Vice President for Investments/Treasurer Louis Morrell, Wake Forest should finish in the top 10 percent in the study.

The endowments fund jumped over the past year from $906.8 million to $1.042 billion after outperforming the projected return of 11.7 percent by 5.8 percent. This added an additional $53 million to the expected return endowment for a total return of $155 million.

The highest return of 50 percent comes from U.S. stocks, while 25 percent comes from non-  U.S. stocks, 20 percent from bonds and 5 percent from cash. The university allocates its money in a diverse collection of stocks.

The endowment places 55 percent of investments in conventional stocks (global equities, emerging markets, multi-sector bonds) and the remainder into alternative stocks (Hedge Funds Absolute Return, private equity, energy, commodities, real estate, Timberland). In 2003, the university projected a 10.6 percent yearly production rate for the future of the endowment.

The goal set for this year was 11.7 percent and was exceeded to hit 17.5 percent, accounting for the jump in resources in the endowment fund.

The Tactical Fund, the university’s only internally managed fund, had a return of 30.91 percent this past year, almost doubling its projected return of 18.03 percent, according to Morrell. This fund added $9.6 million to the endowment. All other funds are managed by outside firms, rather than the Wake Forest Treasurer’s Office.

The return funds distribute 5.3 percent to the budget to cover operating expenses, 1.0 percent to a reserved fund to pay off debt interest or miscellaneous expenses such as the construction of a new building. After this past fiscal year, more money is available for these expenses from the university’s endowment.

The university’s total investment assets concluded the year at $1.256 billion. These resources consist of funds and pensions for the medical school and Reynolda House, annuities, and trust funds from outside investors, all of which are managed by the university but not included in the regular endowment.

These assets performed in the top percentile compared with over 650 universities with a gross return of 17.74 percent, calculated before deducting fund management costs, according to the Trust Universe Comparative Service (TUCS). The median return in the study this year was 9.28 percent, so Wake Forest outperformed this considerably.

This preliminary report will be fleshed out with more extensive results to come in the NACUBO report in January. These results will show the comparison of the size of the endowment with other universities’ funds and will include other factors such as enrollment.