The recent troubles in American financial markets have some worried about the possible damage done to Hopkins' precious endowment fund, the financial lifeblood of the University. The recent hiccup was a nasty accumulation of summertime economic difficulties - the long-foreshadowed credit crunch finally rearing its ugly head, the last vestiges of froth in the housing market bubbling away and oil prices topping the $80 per barrel benchmark.
Yet while the summer's market correction was violent and sudden, its significance to Hopkins' investments was not as harmful as one might first think. Kathryn Crecelius, the University's chief investment officer, pushed aside such concerns.
"[The University's] asset allocation strategy is designed to produce risk-adjusted return over the long term. While we review returns monthly, we are not focused on short-term volatility."
The exact investments in Hopkins' portfolio are a well-guarded secret for reasons of financial security, but Crecelius was able to give the briefest of outlines, stating it is a "global portfolio, with approximately 57 percent in public equities," referring to stocks of public companies.
Moral considerations influence investment choices as well; for instance, Hopkins does not invest in tobacco companies of any kind. All this leads to what Crecelius termed, "a high quality, well diversified investment portfolio which allowed the endowment to weather the summer well, outperforming public equity markets."
All that is well and good, but while the University's assets might have fared better than the common investor and his Etrade account, what Crecelius failed to mention was the probable successfulness also enjoyed by institutions of comparable size to Hopkins, namely other top-notch colleges and universities.
Despite a solid performance over the years, Hopkins' endowment still lags behind other premier schools, both in size and in most recent percentage return on investment.
While the $2.8 billion in Hopkins' pot - which includes the Homewood campus as well as the medical school, and others - is certainly nothing to sneeze at, Harvard University, for example, lords over the list of university endowments with a number larger by over tenfold: $34.9 billion. Other endowment numbers recently released in an article by the Wall Street Journal, including Yale's ($22.5 billion), MIT's ($9.9 billion) and University of Virginia's ($4.3 billion), all put Hopkins to shame.
In addition to having larger endowments to begin with, these same schools also secured higher investment rates of return over the past fiscal year with 23 percent, 28 percent, 22 percent, and 25 percent respectively. Yale in particular has garnered a reputation over the past few decades for consistently leading the pack of top-notch schools when it comes to investment choices.
Hopkins, on the other hand, had a 19 percent rate of return last year. While quite a solid figure, beating the "industry" average rates of return for similar endowments by 1.5 percent, it nevertheless pales in light of other colleges' more successful yields.
As for the reason for Hopkins' smaller endowment size, even Crecelius did not know the exact reason.
"As to our endowment size relative to other institutions, I really don't know the answer," she said.
But she did go on to state that, "Both Yale and Harvard were founded more than a century before JHU." This means, of course, that Hopkins is a late-comer to the university scene, founded in 1876 in comparison to, say, Harvard's year of establishment (1636). Perhaps with an extra 200+ years under its belt (and the countless doubling periods they bring), Hopkins' endowment might have been a little more competitive.
In any case, the glowing endowment figures for the aforementioned universities, including Hopkins, do not take the economy's recent summertime woes into account. In contrast to most corporations which align the end of their fiscal year with that of the normal calendar year, nearly all universities end their fiscal years during the summer months when they are not as busy, specifically (for the universities mentioned) on June 30.
In other words, it is impossible as of yet to determine the damage, if any, done to Hopkins' endowment by recent economic setbacks because these difficulties have not yet been accounted for in any information about its past fiscal year that Hopkins might release.
Nevertheless with the Federal Reserve's recent decision to lower interest rates by a full half percentage point on Sept. 18, a further cut possibly in the air for October and the stock market's enthusiastic response, the most likely outcome to this minor stock market scare is that any harm that might have been caused to the University's endowment during the summer will have no lasting harmful effects.
