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Investment Performance

Primary Investment Objective

The following chart illustrates the University’s actual performance meeting its primary investment objective of realizing a total return exceeding the endowment payout and inflation over a long-term horizon. The University’s investments historically have grown at a rate exceeding the objective.  For the 12 months ending August 31, 2020, the portfolio increased 7.1 percent, outperforming the objective by 0.8 percent. For the three- and five-year periods, the portfolio underperformed by 0.6 and 0.4 percent, respectively. For the 10-, 15-, and 20-year periods, the portfolio outperformed the objective by 1.8, 0.8, and 0.1 percent, respectively.

Primary Investment Objective:
Annualized Total Return Spending + Inflation

As of August 31, 2020

Annualized Total Return after spending, management fees and inflation
  1-Year 3-Year 5-Year 10-Year 15-Year 20-Year
Annual Total Return* 7.1% 6.6% 6.6% 8.6% 7.5% 7.0%
- Spending** 4.3% 4.6% 4.5% 4.3% 4.1% 4.2%
- Mgmt & Admin Fee*** 0.7% 0.7% 0.7% 0.7% 0.7% 0.6%
- Inflation 1.3% 1.9% 1.8% 1.8% 1.9% 2.1%
=Above(Below) Objective 0.8% -0.6% -0.4% 1.8% 0.8% 0.1%

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

**Strategic investment payouts for fiscal years 2019, 2018 and 2017 are included.

**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

The secondary investment objective is for Endowment returns to exceed the target composite benchmark. The composite benchmark’s asset class weights and benchmark components are based on the target asset allocation policy as described under the Asset Allocation tab.  Since it is not possible to invest in the composite benchmark, Endowment performance is also measured against a 70 percent equity / 30 percent bond portfolio.

This performance goal is to seek superior gains within each asset class (U.S. Equity, Fixed Income, etc.) through the performance of outside investment managers against their respective asset class benchmark. Occasionally, investment concentrations to or away from an asset class target, or an investment theme, can also add value against this benchmark.

The Endowment performed in line with the composite benchmark for the most recent fiscal year but underperformed for the three- and five-year periods. Longer term, the portfolio outperformed the policy benchmark for the 10-, 15-, and 20-year periods. While the Endowment has generally exceeded the 70 percent equity / 30 percent bond portfolio, it underperformed in the most recent year significantly enough to impact several recent periods.

Secondary Investment Objective:
Annualized Total Return Composite Benchmark

As of August 31, 2020

Annualized total return versus composite benchmark
  1-Year 3-Year 5-Year 10-Year 15-Year 20-Year
Northwestern University 7.1% 6.6% 6.6% 8.6% 7.5% 7.0%
Composite Benchmark 7.2% 7.6% 7.8% 8.5% 7.3% 5.7%
Global 70% Equity / 30% Bond Index 13.6% 7.7% 8.6% 7.9% 6.2% 5.2%

 

Tertiary Investment Objective

A third performance objective is realizing investment returns competitive with those of peer institutions. According to an annual study of colleges and universities by Cambridge Associates, which provides comparative data on the returns of our peers for the period ending June 30, 2020, Northwestern performed in the top quartile in the 10- and 20-year periods and in the second quartile for the one-, three-, and five-year periods.