University Endowment Drops 9.5 Percent

The value of Georgetown’s endowment dropped nearly 9.5 percent during the first quarter of fiscal year 2008, university officials announced Thursday.

Georgetown’s endowment declined by 12.5 percent over the past year, falling below the $1 billion mark it reached in 2007. According to a statement by Christopher Augostini, Georgetown’s senior vice president and chief financial officer, Georgetown's endowment was valued at $964 million on Sept. 30.

According to University Spokesperson Julie Bataille, Georgetown is taking the market’s volatility into consideration in all financial decisions.

“We conduct our financial planning conservatively and in five-year cycles in order to allow for market fluctuations, but we are closely monitoring the current situation and will make adjustments as appropriate," Bataille said.

According to Augostini’s statement, the university is working to secure its position by raising capital and limiting the university’s exposure to risk. He added that the university is taking steps to steady the endowment fund and foster stability.

“We are not experiencing the liquidity problems other large endowments are having due to a relatively lower allocation to illiquid alternative investments,” Augostini wrote in the statement. “We are moving to raise cash, minimize risk in the portfolio, and limit new private equity and real asset commitments, focusing instead on more liquid opportunities.”

However, according to Bataille, it remains unclear what precise impact the economic downturn will have on the university’s financial standing.

The endowment currently funds only five percent of the current operating budget. At this point, the university has not finalized the budget for next year — including projections for tuition, Bataille said.

In a letter to faculty and staff sent out on Nov. 5, University President John J. DeGioia notes that not only will return on assets be affected, but Georgetown could also experience a shift in the level of federal grants it receives. He added that the university plans to limit spending on discretionary capital projects and remain prudent in hiring new faculty and staff.

Donations, which accounted for 3.7 percent of the endowment in 2007, could also be adversely affected by the downturn. According to William O’Leary, associate vice president for marketing and communications, the university has yet to experience any dramatic drop in donor contributions.

“We expect that we will feel an impact from the crisis, but it is too early to tell how significant, how prolonged or when we will experience it,” he said.

O’Leary noted, however, that particular sectors have withstood the downturn better than others and that the university will refocus its strategy to involve these potential donors.

According to DeGioia’s letter, the ability of students to obtain necessary student loans also remains a serious concern during uncertain credit conditions.

“We are also monitoring the student loan market and developing the capability to become a direct lending institution, should that be needed to give our students continued access to affordable credit,” DeGioia said.

Georgetown was approved to be a direct-lending institution in October, with the opportunity to provide loans as of June 1, 2009. The university has not yet decided whether to take part in the program.

Here at Georgetown, a Web resource for students, faculty and staff is available on the Georgetown Web site, providing links to press releases and various financial services offices on campus.