The Fisher Fine Arts Library, dedicated in 1891

Endowment and Investments

Penn's endowment is comprised of 6,192 individual endowment funds benefiting the University's schools and centers as well as UPHS. The endowment supports a wide range of purposes across the institution, with the majority of funds dedicated to instructions use. The total value of the endowment was $7.7 billion as of June 30, 2013. Payouts from the endowment provided $290 million in budgetary support to the University during the fiscal year.


Associated Investments Fund

The vast majority of the Penn's endowment is invested in the Associated Investments Fund (AIF), a pooled investment vehicle in which the many individual endowments and trusts hold shares or units. An Investment Board appointed by the Trustees of the University oversees the investment of the AIF. The University's Office of Investments is responsible for the day-to-day management of the AIF and implements the policies approved by the Investment Board.

Penn invests the AIF with the goal of achieving high absolute returns while protecting against any permanent loss of capital. The portfolio is well diversified across asset classes and geographies in order to enhance returns while minimizing risk.

AIF Asset Allocation as of June 30, 2013
AIF Policy Portfolio
US Equities 19.1% 25.2%
International Equities 18.1% 12.6%
Emerging Markets 5.7% 5.0%
Absolute Return 28.9% 29.0%
Private Equity 8.6% 8.6%
Real Estate 5.8% 5.8%
Natural Resources 3.8% 3.8%
High Yield 0.4% 0.0%
Fixed Income/Cash 9.6% 10.0%
Total 100.0% 100.0%

As of June 30, 2013, the AIF had $971 million in outstanding commitments to private equity, real estate and natural resources partnerships as well as to certain managers in the absolute return portfolio. The AIF maintains a conservative liquidity profile and can meet these commitments easily. As of June 30, 2013, the AIF could convert over half of the portfolio into cash by calendar year end through the sale of directly held securities, withdrawals from various equity and absolute return funds.

AIF Performance

The AIF returned a positive 14.4% for the fiscal year, surpassing its composite benchmark return of 12.7%. The AIF’s significant exposure to public equities, both domestic and foreign, provided a tailwind during the year as the US and developed public markets were up strongly.

Portfolio allocations to international equity and absolute return performed particularly well relative to their individual benchmarks. The AIF’s less liquid assets classes trailed marketable asset classes for the year but produced solid absolute performance. While the AIF lagged the composite benchmark over the past three years, returns for the AIF over longer periods have surpassed the benchmark.

Annualized Returns for Periods Ending June 30, 2013
1 - Year 3 - Year 5 - Year 10 - Year
AIF 14.4% 11.3% 5.5% 8.0%
Composite Benchmark 12.7% 12.0% 4.6% 7.4%

AIF Spending Rule

The University's endowment spending policy balances the objectives of maximizing budgetary support to endowed programs and maintaining purchasing power of the endowment into perpetuity. The actual payout in any given year is determined by a formula designed to smooth the impact of short-term changes in the endowment's value on spending distributions. The spending rule target payout is based on the sum of: (i) 70% of the prior fiscal year distributed adjusted by an inflation factor; and (ii) 30% of the lagged fiscal year-end fair value of the AIF, multiplied by 6.5% for financial aid funds and 4.7% for all other funds.

The University expects to use the current spending rule formula with no adjustments for Fiscal Year 2014.

A Five Year review of Investments ($ in thousands)
Investments 2013 2012 2011 2010 2009
Equity $3,337,504 $3,013,823 $2,826,468 $2,200,115 $2,095,481
Debt 1,273,390 1,393,199 1,273,437 1,204,031 742,814
Short-Term 505,707 601,663 496,232 458,701 478,070
Split-Interest 484,658 473,140 467,451 383,901 344,030
Real Estate 451,633 362,931 296,771 237,364 250,565
Absolute Return 2,209,648 1,535,108 1,628,223 1,394,827 1,251,953
Private Equity 684,639 607,969 542,827 407,484 318,304
Natural Resources 292,671 247,192 186,336 134,519 96,187
Other 12,869 2,530 2,905 5,621 1,325
Total $9,252,719$8,237,555 $7,773,878 $6,426,563 $5,578,728
Fair Value $7,741,396 $6,754,658 $6,582,030 $5,668,937 $5,170,539
AIF $7,800,626 $6,770,032 $6,564,863 $5,518,093 $4,995,689

Annual Financials

For detailed annual report information, please click the link below.

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