Endowment and Philanthropy Summary

Investment Management Update

LTIP’s investments consist of a diversified investment portfolio of public equities and fixed income, private equity, real assets, and other opportunistic strategies. In managing our investments, we adhere to a prudent, long-term investment strategy.

The University spending target for the year ending June 2022 was 4.5 percent, based on a 20-quarter average of the market value per unit of endowed pool assets. Beginning with fiscal year 2023, the spending rate has been increased to 5 percent, aimed at providing increased support for scholarships and educational programs.

The University’s spending policy of using rolling 20-quarter average balances is intended to smooth out the “peaks” and “troughs” in the investment markets, saving a portion of the earnings in the good years to offset the less profitable years. This provides generous current spending while preserving future purchasing power, which is known as “intergenerational equity.”

As of the end of fiscal 2022, total endowment assets were valued at $4.61 billion, of which $4.45 billion was invested in the Long-Term Investment Pool. The other endowment assets, which include charitable remainder trusts, charitable gift annuities, and other life income funds in addition to some donorrestricted funds, represented $161 million; these assets are not invested in the Long-Term Investment Pool.

For the fiscal year ending June 30, 2022, the total endowment assets decreased $5.0 million, and have increased a cumulative $1.85 billion over the last five years. This amount reflects the impact of investment returns and generous giving, net of consistent support for scholarships and University programs. Over this same period, endowment assets invested in LTIP have provided $622 million of program support, including $140 million in fiscal 2022.

LTIP Performance Summary

In the fiscal year ending June 30, 2022, U.S. equity markets posted negative returns, with the S&P 500 at -10.6 percent; the MSCI All Country World Index ex-US returned -19.4 percent. Fixed income markets represented by the Bloomberg Barclays U.S. Aggregate finished the year negative posting an overall return of -10.3 percent.

As of June 30, 2022, LTIP’s investment return was 0.1 percent over the last year, 10.9 percent per year over the five-year period, 9.7 percent over the 10-year period, and 8.6 percent over the 20-year period. These annualized investment returns are net of external investment manager fees. These results demonstrate long-term growth even when considering periods of negative investment returns, such as the credit crisis, and more recent declines during March 2020 and Spring 2022. Penn State’s diversified approach has allowed the endowment to support program spending, such as scholarships and faculty positions, while maintaining real, inflation-adjusted growth for the future generations.

The Penn State endowment portfolio is broadly diversified, with 16.3 percent in fixed income as of June 30, 2022; 37.2 percent in public equities (Global, U.S. and non-U.S.); and 26.9 percent in private equity. In addition, 10.3 percent is invested in real assets including real estate, natural resources, and commodities, while 9.3 percent is invested in opportunistic assets. The majority of the endowment’s assets are equity-type investments that, over the long term, are expected to generate returns more than inflation to preserve the endowment’s purchasing power for future generations.

Penn State Investment Council

Penn State’s Board of Trustees created the Investment Council in response to the University’s increasing asset base and complex investment strategies. The council provides direct oversight of the endowment and longterm investment program, and regularly reviews asset allocation, new asset classes, investment strategies, and manager performance.

Sources of Gifts Received 2021–22

Where the $331 million came from

Information about the full University budget can be found on the Budget Office website at budget.psu.edu/openbudget