Northwestern undergraduates received a crash course Thursday inhow a university endowment works and how that money isinvested.
William McLean, NU’s vice president and chief investmentofficer, discussed with 20 students the keys to making soundfinancial decisions in an event sponsored by the Nugget InvestmentGroup, a student investment group.
“At Northwestern we’re both quantitative and qualitative,”McLean said. “We look at what our peers do. We think about ourscenarios.”
The university’s endowment fund, about $2.73 billion, serves asthe university’s savings.
McLean said NU is considered a mostly endowment-based universityunlike some schools that are tuition based and derive the majorityof their budget from tuition.
NU’s endowment is the 14th largest of U.S. universities, McLeansaid. Harvard University has an endowment of $16 billion, YaleUniversity one of $10 billion and Stanford University one of $8billion.
In order to ensure a sound endowment, McLean emphasized thatasset allocation, or investing money in various types of venturesand funds, is crucial. NU’s endowment fund is divided into sixcategories, including U.S. equities, international equities, fixedincome, market hedged, private investments and real assets.
“Future students should be treated just as well as you’retreated,” he said. “We want to have an all-weather portfolio.”
Diversification has been one of McLean’s top priorities sincetaking his position at NU in 2002. So far he has tried to make moreof NU’s investments active and not passive. Rather than solelyinvesting in the Standard & Poor’s 500-stock index andaccepting that market’s gains or losses, NU is becoming morepro-active in individually picking and investing in stocks.
“We’ve finally hit a period where diversification helped,” hesaid.
NU’s investments lost about $180 million in the 2002 fiscalyear, which ended Aug. 31. The loss prompted McLean and his staffto start looking more closely at the specific stocks in whichuniversity money is invested.
Weinberg sophomore Ryan Begelman, president of the studentinvestment group, said Nugget is trying hard to focus more oncampus education of financial issues.
“We’re a campus group,” said Begelman, “and as such we’remotivated to educate the campus.”
