Investment Performance Commentary for the Year Ending June 30, 2007
Rochester's net return for the fiscal year ending June 30, 2007 was approximately 19.4%, substantially above the 8.0% goal contained in the University's financial plan. It is above the benchmark return of 18.8% (comprised of 60% Wilshire 5000, 20% Lehman Aggregate and 20% EAFE).
The endowment value at the end of the fiscal year was approximately $1.77 billion, roughly $246 million above the reported value at the beginning of the year. The change in endowment value was attributable to investment returns of $288 million, gifts and additions of $40 million and spending and withdrawals of $83 million. Rochester's five-year average annual return through June 30, 2007 is 13.4% vs. 11.7% for the benchmark. The ten-year average annual return through June 30, 2007 is 10.8% vs. 7.4% for the benchmark.
Major asset classes generated the following performances in fiscal year 2007:
- Domestic equity managers returned 21.1% compared to 20.5% for the domestic equity benchmark (Wilshire 5000).
- Domestic fixed income returned 5.5%, compared to the 6.1% return for the benchmark (Lehman Aggregate). Duration on the University's fixed income portfolio decreased slightly from 5.25 to 4.7 years in fiscal 2007.
- International equities returned 28.7% compared to 27.0% for the benchmark (EAFE). Active management, similar to the domestic equity program, accounted for the outperformance.
- The alternative investment program generated a net return of 17.8%. Hedge funds returned 17.3%, private equity returned 23.8% and real assets returned 15.3%.
It is important to note that Rochester’s return was generated through the efforts of many talented advisors, investment committee members, consultants and investment office staff. It is the consensus of these groups that, over time, the University of Rochester's target return of 8% per annum is achievable.