Investment Performance

Primary Investment Objective

The following chart illustrates the University's actual performance in meeting its primary investment objective of realizing a total return exceeding the endowment payout and inflation over a long-term horizon. On an annualized basis, the Fund exceeded this performance objective for the trailing one-, three-, 10- and 15-year periods, respectively. In addition, as markets recovered from the global recession of 2008-09, the Fund exceeded its performance objective by 4 percent over the past three years. However, financial market returns in our asset classes have underperformed our objective over the five-year periods.


Primary Investment Objective: Annualized Total Return ≥ Spending + Inflation

Annualized Returns: Exceeding the Objective as of August 31,2013

1 Year

3 Year

5 Year

10 Year

15 Year

Annual Total Return*

11.6%

11.6%

4.9%

9.6%

9.2%

- Spending 4.1% 4.1% 4.2% 4.0% 4.0%
- Mgmt & Admin Fee 0.7% 0.7% 0.6% 0.6% 0.6%
- Inflation 1.5% 2.3% 1.3% 2.4% 2.3%
=Above(below)objective     5.3% 4.5% -1.2% 2.6% 2.3%

 Total returns are net of fees and are calculated on annual changes in net asset value.  They may differ from payout distributions.

The management and administrative fee is set by the Northwestern Board of Trustees and used to support the University's direct and indirect costs related to gift-funded activities.

Secondary Investment Objective

We also measure the endowment returns against a target composite benchmark - the secondary investment objective. The composite benchmark's weightings and components are based on the target asset allocation policy, which is derived as described under the Asset Allocation tab. The policy assigns weights to each asset class and a benchmark or set of benchmarks, which are deemed as the best fit, are assigned to each asset class.

This performance goal is to seek superior gains within each asset class (US Equity, Fixed Income, etc.) through outside investment managers' out-performance of the respective asset class benchmark. In addition, occasional investment concentrations to or away from an asset class or an investment theme can add value against this benchmark.

The Fund has surpassed the composite benchmark for the one-, three- and 10-year periods. The Fund slightly underperformed in the five-year period due to the heavy discounting of values for less liquid investments that resulted in the aftermath of the 2008 economic contraction and subsequent disruption of financial markets. In addition, over the 10-year period, all asset classes outperformed their benchmarks on a relative basis, except for Private Investments.

Secondary Investment Objective: Annualized Total Return ≥ Composite Benchmark

Ending August 31, 2013

1 Year 3 Year 5 Year 10 Year
Northwestern University 11.6% 11.6% 4.9% 9.6%
Composite Benchmark 9.1% 10.3% 5.2% 8.2%

Tertiary Investment Objective

Another performance objective is realizing investment returns competitive with those of peer institutions. Cambridge Associates provides comparative data on returns of other similar university endowments. As the chart below shows, Northwestern has performed in the top quartile of the colleges and universities surveyed over the past three- and 10-year periods, and in the second quartile over the one- and five-year periods.

NOTE: The previous chart compares annual returns for the year ending August 31, 2013 (Northwestern’s fiscal year end) while the following chart compares annual returns for the year ending June 30, 2013 (typical fiscal year end of other colleges and universities surveyed).

Tertiary Investment Objective: Annualized Total Return vs. Peers

Ending June 30, 2013

1 Year 3 Year 5 Year 10 Year
Northwestern University 11.9% 11.9% 3.9% 9.7%
5th Percentile 14.4% 11.8% 5.5% 9.4%
25th Percentile 12.7% 10.8% 4.4% 8.2%
Median 11.6% 9.9% 3.7% 7.6%
Number of Participants 144 140 138 129
Based on Cambridge Associates' endowment survey of 144 college and university endowments.