Oberlin has long had links to Asia. Today, those links are largely financial. It's not surprising then that when the stock market in Asia crashed and aftershocks were felt all over the world, Oberlin College was not immune.
Any member of the Oberlin community who knows how large of a percentage Oberlin's endowment portfolio is invested in international stocks may have been as shaky as they were after last Monday's crash of the Hong Kong stock market.
While all of these events may seem foreign to Oberlin College, they have a large impact on the investment performance of Oberlin's Endowment Fund. Vice President of Finance Andy Evans estimates Oberlin's Endowment Fund to be worth $405 million, which he says "is wonderful for a college this size."
Evans has led a drastic reform of Oberlin's endowment investment policy since he was hired two years ago.
"When I got here, there was a lot of frustration on my part. Only some of our investment goals were being met. There were strong feelings by trustees who said we should save, not spend. Saving would mean spending more on students in the future, not students today," Evans said.
On June 14, 1997 a new endowment spending policy was ratified which Evans said met all investment goals. The goals of the new policy, according to a pamphlet distributed to the Board of Trustees this summer, were to "increase the value of the endowment in real terms, protect the purchasing power of the endowment from inflation, provide stable and predictable increases in spending in real terms and maintain equity between current and future generations who are beneficiaries of endowment spending."
Over 45 percent of Oberlin's total stock portfolio, or $96.6 million, is invested overseas. Oberlin holds assets in many of the foreign stock markets which have recently suffered.
"We took a beating in our foreign stocks. Up until October we were doing extremely well," Director of the Investment Office and Trust Officer Bernard Gordon said. Although stocks performed poorly, bonds took "a good jump in October," according to Gordon.
The percentage of foreign stocks held by Oberlin compared to other colleges similar to Oberlin is on the high side. Oberlin holds 25 percent of its total endowment fund in overseas stocks. Similar colleges, on the other hand, tend to hold only about 15 percent of their total endowment portfolios in the foreign stock market.
Gordon said a large portion of Oberlin's endowment fund is invested in foreign markets due to their immense investment opportunities. Gordon acknowledged a loss in the market value of Oberlin's foreign stocks. However, he maintains the loss is not very significant. He said Oberlin's foreign stocks have already shown an impressive eight percent return this year. Gordon insists the Oberlin community should not be worried about recent market slumps since "Oberlin has had so many fabulous months in the last three years."
For the 1995 fiscal year, the endowment fund earned a total return of 10.8 percent. In 1996, the fund earned 16.8 percent. For the 1997 fiscal year, the fund earned a total return of 19.72 percent.
As of June 30, 1995, Oberlin's endowment fund was worth $228 million. At the same date in 1996, the fund was worth $326 million. The fund was worth $386 million on June, 30 1997. The current value of the fund is estimated at $405 million. Gordon says "most of the increase in the worth of Oberlin's endowment fund is due to investment performance as opposed to gifts."
Fifteen percent of Oberlin's annual expenditure is from the school's endowment. This equates to about 4.2 percent of the endowment being spent each year. Budget Director Bob Knight said, "In past years the endowment was a much bigger part of the total budget. Knight says he wishes Oberlin could take more from the endowment fund, yet doing so would create an unequal balance between expenditure on students today and students in the future. "The more we can take from the endowment," said Knight, "the less we have to take from tuition and room and board."
Knight claims the dramatic improvement in the investment performance of the endowment fund has allowed Oberlin to hold down price increases compared to other LAS colleges. He said, "Oberlin is taking on a leadership role by holding down tuition increases. We want to keep tuition low and spend more of the endowment, but this in not always practical."
The reason Oberlin does not spend more of its endowment, according to Knight, is to build up the endowment fund. Effects of the new endowment policy will phase in over the next couple of years and spending will increase.
Knight stressed the importance of the sound management of the endowment fund. In order to push Oberlin upwards in college rankings Knight hopes to "start doing things that put Oberlin on the map."
"We like being in the business of helping Oberlin be the best college it can be." If the annual returns on Oberlin's endowment fund continue to rise as strongly as they have been doing in the last three years, these three financial experts and their collegues will definitly put Oberlin"on the map."
Copyright © 1997, The Oberlin Review.
Volume 126, Number 8, November 7, 1997
Contact us with your comments and suggestions.