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Rice Management Company
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The Rice Endowment made Rice the university it is today. 2 In 1904, William Marsh Rice left $4.6 million to found The Rice Institute. Rice was tuition-free from 1912 to 1965. Today 62% of students receive financial aid and Rice’s tuition is still significantly lower than peers. Even after building a campus, funding decades of free tuition, financial aid and operating funds, the Rice Endowment remains one of the largest among private universities.
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Rice Management Company Private Universities Ranked by June 30, 2012 Endowment Market Value 3 $Billions 1Harvard30.4 2Yale19.3 3Stanford17.0 4Princeton17.0 5MIT10.1 6Columbia7.7 7Northwestern7.1 8Pennsylvania 6.8 9Chicago6.6 10Notre Dame6.3 11Duke5.6 12Emory5.5 13Washington5.2 14Cornell4.9 15Rice4.4 16USC3.5 17Dartmouth3.5 18Vanderbilt3.4 19New York2.8 20Johns Hopkins2.6
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Rice Management Company 4 RankInstitution Number of FTE Students Endowment Assets ($) per FTE Student 1Princeton7,770$ 2,181,998 2Yale11,7851,641,563 3Harvard20,1611,509,616 4Stanford15,1551,124,105 5MIT10,762943,093 6Rice6,001736,310 7Dartmouth6,179564,231 8Notre Dame11,867533,401 9Washington12,694411,690 10Northwestern18,030394,819 Private Universities Ranked by Endowment Assets per Full-Time Equivalent (FTE) Student – FY 2012
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Rice Management Company CONFIDENTIAL Population: Private Schools with endowment market values > $2.0 B. Notables not reporting: Columbia, Cornell 5 Source: Cambridge Associates (preliminary flash report of FY2012 data) Figures are self reported
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Rice Management Company Endowment Spending – Fiscal Year 2012 Percent of Operating Budget Funded from Endowment Distribution 38 reporting institutions with endowments > $1 Billion Source: Cambridge Associates Annual Analysis of College and University Investment Pool Returns 2012-12 6
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Rice Management Company Endowment Values Compared to Purchasing Power Target 7
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Rice Management Company Endowment/Foundation Goals: Achieve Investment Returns in Excess of Spending and Inflation 8 Return - Inflation - Spending > 0 8% - 2.5% - 5.5% > 0
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Rice Management Company * 35% Russell 3000 / 35% ACWI ex US / 30% Barclays Capital Aggregate Bond Index How Have We Been Doing? - Passive portfolios have not kept up with spending and inflation 9
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Rice Management Company 10 Historical Returns Make the 8% Hurdle Seem Reasonable
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Rice Management Company Forecasted Returns Make Earning 5.5% real or 8% after inflation difficult 11
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Rice Management Company Modern Portfolio Theory Argues for Adding Uncorrelated Asset Classes To Improve Return or Diminish Risk 12
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Rice Management Company Rice Has Moved from Stocks and Bonds Towards Alternatives 13 US Stocks International Stocks Fixed Income & Cash Hedge Funds Venture Capital & Private Equity Real Assets Opportunistic
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Rice Management Company Hedge Funds Are No Longer An “Undiscovered” Asset Class 14
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Rice Management Company As Hedge Fund AUM Has Grown, Correlation with the S&P Has Risen 15
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Rice Management Company Private Equity Funds Are Also Proliferating 16
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Rice Management Company Clearly we live in interesting times…..so what is a long-term investor to do? 17
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Rice Management Company Equities Outperform Bonds Over Long Time Periods 18
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Rice Management Company Market Timing Is a Losing Game – Create a Plan and Stick To It 19
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Rice Management Company Fees Matter To Wealth Creation 20
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Rice Management Company The Rice Endowment believes a long-term portfolio should be: Equity-oriented Diversified Invested in real assets (real estate/natural resources) Value focused and valuation sensitive Fee sensitive Partnered with managers who have a real investment edge 21
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