58% of the Endowment Portfolio Would be Affected by Divestment
Market Value
Target
6/30/13
Asset Category
Allocation (Millions) Composition
Separate portfolios and
Public Equity (16)*#
34
523
commingled funds
Semi-marketable (14)
24
364
All commingled funds
Subtotal
58%
$887
Private Equity
Real Assets
Fixed Income/Cash
Total
19
14
9
100%
296
243
131
$1,557
Could Hold Fossil
Fuel Stocks or Bonds
All commingled funds
All commingled funds
Commingled funds and cash
*indicates the number of managers in this category
# 6% of endowment is separately held in Wellesley’s name. We vote these proxies.
Yes
Yes
No
No
No
The Cost of Divesting Separately Held Investments
•
•
•
•
The endowment holds approximately 0.5% in the largest 200 publicly traded fossil
fuel companies in three separately held accounts. These accounts represent 6% of
endowment assets.
Restricting the mandates of these managers is not possible, so divestment would
require the College to terminate these manager relationships.
Over the last 10 years, these managers have beat their benchmarks by 1.75% a year.
Finding new managers who would perform as well and be willing to manage a
restricted mandate is highly unlikely.
Assuming that replacement managers earned the benchmark return, the cost of
divestment would be:
6.0%
x
Exposure to terminated managers
0.10%
Foregone return
1.75%
=
Performance that could not be
replaced
x
$1,600 million
Current endowment value
0.10%
Reduction in
endowment return
=
$1.6
million/year
Cost per year
The Cost of Divesting Separately Held and Commingled Holdings
•
•
•
•
Investments with managers whose mandates allow ownership of public stocks and
bonds represent approximately 58% of the endowment.
Restricting the mandates of these managers is not possible, so divestment would
require the College to terminate these manager relationships.
We expect current managers in these asset classes to earn 1.6% more than
benchmarks over the next seven years. Finding new managers who would perform
as well and would be willing to manage a restricted mandate is highly unlikely.
Assuming that replacement managers earned the benchmark return, the expected
return of the endowment would be reduced by 1.6% a year. The dollar cost of
divestment would be:
58%
x
Exposure to terminated managers
0.9%
Foregone return
•
1.6%
=
Performance that could not be replaced
X
1,600 million
Current endowment value
0.9%
Reduction in endowment return
=
$15 million
Cost per year
This estimate is in line with the $200 million over 10 year cost estimated by
Swarthmore, an institution with a similar investment strategy and endowment.