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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 Endowment exceeded this performance objective for all periods.

Primary Investment Objective:
Annualized Total Return Spending + Inflation

As of August 31, 2018

  1-Year 3-Year 5-Year 10-Year 15-Year
Annual Total Return* 10.3% 7.9% 8.5% 6.6% 9.2%
- Spending** 4.9% 4.6% 4.3% 4.3% 4.1%
- Mgmt & Admin Fee*** 0.7% 0.7% 0.7% 0.7% 0.6%
- Inflation 2.7% 1.9% 1.5% 1.4% 2.1%
=Above(Below) Objective 2.0% 0.7% 2.0% 0.2% 2.4%

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

**Special payouts for fiscal years 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.

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 has outperformed the composite benchmark for the most recent fiscal year. Longer term, the portfolio has outperformed the policy benchmark for the five- and 15-year periods and essentially matched it for the 10-year period.  The three-year period is the only term for which returns lag the benchmark.

Secondary Investment Objective:
Annualized Total Return Composite Benchmark

As of August 31, 2018

  1-Year 3-Year 5-Year 10-Year 15-Year
Northwestern University 10.3% 7.9% 8.5% 6.6% 9.2%
Composite Benchmark 9.9% 8.7% 8.2% 6.7% 8.2%

 

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 returns of peers for the period ending June 30, 2018, Northwestern performed in the top quartile over all time periods (one-, three-, five-, and 10-year).