The Muhlenberg Endowment
Through judicious investment, Muhlenberg College’s endowment corpus generates returns that help the College fulfill its mission, supplementing its annual budget for scholarships and financial aid, faculty positions, research, capital needs and more. In the longer term, the endowment strengthens the College’s stability by balancing changes in tuition and philanthropy revenue, buttressing the College’s overall financial health and creditworthiness. It also provides a valuable tool for the College’s financial supporters, offering opportunities to make a long-term impact through endowed gifts that fund important programs and initiatives for generations to come. The College works continuously to strengthen and grow the endowment through reinvestment, fundraising, and budget savings. A report of Muhlenberg's endowment investment allocations and performance is available here.
The Board of Trustees is responsible for the overall stewardship of the College’s endowment. The Asset Management Team, a committee established by resolution of the board, assists in establishing and maintaining all investment policies and strategies for the College, including the following:
- Arranging for the investment, reinvestment and supervision of the College’s funds
- Determining what portions of the College’s funds will be invested in bonds, stocks, private credit, and other types of investments
- Advising the Board regarding investment policies and reporting on investment portfolio performance.
- Reviewing and recommending the financial policies and procedures of the College
- Keeping informed of the College’s operations and financial condition
Asset Management Team members must discharge their duties solely in the interest of the College and for the exclusive purpose of meeting its financial needs. The team may engage the services of investment managers with specialized capabilities and skills in order to meet the College’s investment objectives and guidelines.
Outsourced Chief Investment Officer
Muhlenberg engages an Outsourced Chief Investment Officer (OCIO), currently Hirtle Callaghan, to oversee how the funds in the endowment are invested. The OCIO invests the College’s endowment funds in an array of instruments including publicly traded equities, mutual funds, fixed-income securities, private credit and private equity.
Investment Philosophy
The Muhlenberg College endowment exists solely to support the College’s fulfillment of its mission by sustaining and enhancing the institution’s financial position. Bound by section 501(c)(3) of the Internal Revenue Code (IRC), Muhlenberg is scrupulous in avoiding the appearance of political favor, advocacy, or commentary, including through its investment strategies.
The Asset Management Team manages the College's endowed, long-term assets, primarily focusing on strategic asset allocation. They set long-term asset class allocations and acceptable ranges, while the Outsourced CIO (OCIO) rebalances within these ranges based on market conditions, all in accordance with the College’s investment policy.
Key principles:
- Long-Term Goals: Investment strategies must blend asset classes to meet long-term goals, requiring periodic asset allocation studies.
- Market Timing: This is an ineffective strategy for institutional funds; the Asset Management Team remains fully invested.
- Active vs. Passive Management: Some asset classes benefit from active management, while others are better suited for passive strategies. Evaluations are based on long-term performance and relevant benchmarks.
- Cost Efficiency: Investment strategies should be cost-effective, providing net benefits after implementation and allowing for the monitoring of costs.
- Ethical Investment: Pursuant to its mission, the College will be aware of the non-monetary impact of its investments.
Delegation of Responsibilities:
- Asset Management Team: Selects custodians and the OCIO, reviews investment results, recommends spending guidelines, addresses policy issues.
- OCIO: Assists in policy development, asset allocation strategies, investment manager selection, performance evaluation, rebalancing portfolios, and communicating policies. Provides research and supports the Asset Management Team’s special tasks.
- Investment Managers: Follow guidelines, manage assets, document activities, vote proxies, and report significant changes.
- Fund Custodian: Reports on holdings and transactions, provides annual summaries, and performs custodial functions.
Investment Approach:
- Returns: Achieve returns that preserve and enhance purchasing power, ensuring long-term financial health and continued support for the College. The focus is on total return, with current income as a secondary concern.
- Risk Management: Align portfolio risk with policy asset allocation.
- Constraints: Ensure liquidity, manage with a long-term horizon, and maintain tax-exempt status.
Investment Objectives:
- The primary long-term financial objective of the endowment is to provide a relatively predictable, stable and constant (in real terms) level of support - both through current income and capital gains - to the College’s operating needs. To achieve this goal, it will be necessary to preserve the real (i.e., inflation-adjusted) purchasing power of the endowment. This objective should be achieved over rolling five- to ten-year periods on a total return basis.
- The long-term investment objective of the endowment is to earn an average annual real total return of at least 5% per year, net of management fees, over the long-term (rolling five- to ten-year periods). To achieve this objective, the endowment will be managed to maximize the real return, or the nominal return less inflation, of the assets over a complete market cycle with emphasis on preserving capital and reducing volatility through prudent diversification. In order to achieve this objective, the committee must be cognizant of the current spending policy. Interim results will be reviewed with the understanding that an important priority of the assets is providing for future generations. Due to capital market volatility, it is understood that the return may vary significantly over shorter periods of time.
