Endowment and Philanthropy Summary
Endowment Overview
The Long-Term Investment Pool (LTIP) is Penn State’s investment portfolio into which most of the endowed funds established at the University are invested. This commingled pool operates much like a mutual fund. Each individual endowment owns units in an Endowment Pool, just as an individual would purchase shares in a mutual fund. The Endowment Pool owns units in LTIP. As with a mutual fund, the value of each unit at the time funds are invested in the pool determines how many units an individual fund acquires.
Endowed gifts are expected to be held by Penn State in perpetuity. The initial gift is invested, and an annual distribution is allocated to the purpose designated by the donor. Through this distribution process, an endowed gift today is intended to have relatively the same inflation-adjusted value and impact for future generations.
Penn State strives to be a good steward of its endowed gifts and follows a prudent management philosophy in investing these gifts.
To demonstrate the impact of an endowed gift, assume $100,000 was gifted in 2003 to establish an endowment. Over the last twenty years, the endowment gift would have generated $116,000 in aggregate distributions to support the endowment’s purpose. As of June 30, 2023, due to compounding of investment returns, the original gift is now worth $204,000 and will benefit future generations.
The University’s Board of Trustees has established four basic investment management principles to guide the University’s Investment Council. These four principles help ensure that the spending power of each endowment gift will be maintained in the face of economic fluctuations.
Basic Endowment Management Principles
- Provide sufficient total return on investments to meet the investment objectives.
- Focus on long-term performance.
- Accept a reasonable and prudent level of risk while maximizing “total” return.
- Diversify investments to reduce risk.
LTIP Endowment Gifts
(Year ending June 30, 2023)
Investment Management Update
LTIP’s investments consist of a diversified investment portfolio of equities, fixed income, real assets, and other opportunistic strategies. In managing our investments, we adhere to a prudent, long term investment strategy.
To focus on the long-term and assist in reducing the short-term fluctuations of distributions due to near-term changes in the investment markets, the actual distribution each year is calculated by multiplying the 5 percent policy level distribution by the 20-quarter average of the market value per unit of endowed pool assets.
The use of a rolling twenty-quarter average, instead of the most recent unit value, is intended to smooth out the “peaks” and “troughs” in the investment markets, saving a portion of the earnings in the good years to offset the less profitable years. This provides generous current distributions while preserving future purchasing power, which is known as “intergenerational equity.”
Endowment Market Value Summary by Year
As of the end of fiscal 2023, total endowment assets were valued at $4.57 billion, of which $4.54 billion was invested in the Long-Term Investment Pool.
For the fiscal year ending June 30, 2023, the total endowment assets increased $101 million and have increased a cumulative $1.7 billion over the last five years. This amount reflects the impact of investment returns and generous giving, net of annual distributions to support scholarships and other intentions defined by each endowment. Over this same period, endowment assets invested in LTIP have provided $685 million of distributions, including $169 million in fiscal 2023.
LTIP Performance Summary
For the one-year period ending June 30, 2023, U.S. equity markets posted positive returns, with the S&P 500 returning 19.0 percent and the MSCI All Country World Index ex-US returning 12.7 percent. Fixed income markets, represented by the Bloomberg Barclays U.S. Aggregate, finished the year slightly negative, posting a return of -0.9 percent.
As of June 30, 2023, LTIP’s investment return was 3.9 percent over the last year, 10.1 percent per year over the five-year period, 9.0 percent over the 10-year period, and 8.8 percent over the 20-year period. These annualized investment returns are net of investment manager fees and investment expenses. These results demonstrate long-term growth even when considering periods of negative investment returns. Penn State’s diversified approach has allowed the endowment to support endowment intentions, such as scholarships and faculty positions, while maintaining inflation-adjusted growth for the future generations.
Average Annualized Total Returns
for periods ending June 30,2023
Total returns include interest, dividends, and market price changes less external investment manager fees and some other expenses.
LTIP Asset Class Allocations
as of June 30,2023
The Penn State endowment portfolio is broadly diversified, with 14.5 percent in fixed income as of June 30, 2023; 38.4 percent in public equities (Global, U.S. and non-U.S.); and 24.3 percent in private equity. In addition, 13.1 percent is invested in real assets including real estate, natural resources, and commodities, while 9.7 percent is invested in opportunistic assets. The majority of the endowment’s assets are equity-type investments that, over the long term, are expected to generate returns more than inflation to preserve the endowment’s purchasing power for future generations.
Penn State Investment Council
Penn State’s Board of Trustees created the Investment Council in response to the University’s increasing asset base and complex investment strategies. The council provides direct oversight of the endowment and long-term investment program and regularly reviews asset allocation, new asset classes, investment strategies, and manager performance.
Ex Officio Council Members
Dr. Sara F. Thorndike, Chair
Senior Vice President for Finance and Business/Treasurer
The Pennsylvania State University
Joseph M. Cullen
Chief Investment Officer, Office of Investment Management
The Pennsylvania State University
Mary Lee Schneider
(Member, Penn State Board of Trustees and Chair, Subcommittee on Finance)
Former President and CEO
SG360°
Matthew W. Schuyler
(Chair, Penn State Board of Trustees)
Chief Administrative Officer
Hilton Worldwide
At-Large Council Members
Randall E. Black (2025)
CEO and President
First Citizens Community Bank
James P. Brandau (2025)
Managing Director, Private Wealth Management
William Blair & Co.
Barbara L. Doran (2023)
CEO/CIO
BD8 Capital Partners, LLC
Blake Gall, CFA (2024)
Founder and President
MicroPlusPlus Investment Management
J. Alex Hartzler (2023)
Managing Partner & FounderWCI Partners, LP
Edward R. Hintz Jr. (2024)
President
Hintz Capital Management Inc.
Joseph B. Markovich (2024)
Managing Director
J.P. Morgan Private Bank
Colleen Ostrowski (2025)
Sr. Vice President and Treasurer
Visa
J. David Rogers (2023)
Chief Executive Officer
RPO, LLC
Brandon D. Short (2024)
Executive Director
Portfolio/PGIM Real Estate
Sources of Gifts Received 2022–23
Where the $305 million came from
Designated Purposes of Gifts Received 2022–23
Where the $305 million went
Growth in Private Support and Donor Base
New Commitments
Gift Receipts
Number of Donors
Even as the Office of University Development (OUD) continued to secure philanthropic support in FY23, we also participated in institution-wide efforts intended to create a secure and stable financial future for Penn State. For more than twenty-five years, Penn State’s advancement operation has been funded in part from a fee on the endowment. To further alleviate pressure on the Penn State budget, the University has made the decision to fund the majority of the advancement budget through an annual fee on the endowment based on its twenty-quarter moving average market value within Penn State’s Long-Term Investment Pool (LTIP). A one-year phase-in of this approach began in FY23 and will be fully implemented during FY24. This approach frees critical tuition and appropriation dollars to be used directly to support Penn State’s educational mission and helps to stretch the impact of those funds.
Growth in Philanthropy Funded Scholarships
(Fiscal year ending June 30, 2023)
Student Support by Category 2021–22*
Information about the full University budget can be found on the Budget Office website at budget.psu.edu/openbudget