The Shanghai Composite Index dropped 8.5 percent on Monday, Aug. 17, which caused a ripple of volatility throughout global economies, including that of the United States. Marlborough’s endowment, 50 percent of which is invested in the stock market, was also affected by the recent volatility in the stock market. The School’s stock portfolio faced about a 5 percent drop overall since July.
Marlborough’s Finance Committee assembled on Monday, Oct. 12 for their quarterly meeting to discuss whether or not they would take action to adjust the School’s stock portfolio and what, if any, actions to take.
According to Director of Finance and Operations Nick Hernandez, the Committee will most likely choose to do nothing regarding the portfolio and continue watching the market for any changes in the next couple of months.
“Even though there are these fluctuations, I don’t think anybody is hitting the panic button. More likely, we understand that that’s the market, and we are in the market, and we want to continue to be in the market. But the way we look at this is that it’s a long-term approach that we take,” Hernandez said.
The School’s endowment is valued at a little less than $48 million as of 2015. Approximately $1.5 million is drawn annually to cover the cost of operations, such as scholarships and salaries, as the tuition cost of $36,365 per student does not cover the full cost of a Marlborough education. In turn, the School, through the efforts of Director of Advancement Lynn McCarthy and her team, raises about $3 million on average each year from alumnae and current families for the endowment.
Before the 2008 stock market crash, the School handled the investment of the endowment internally and hired its own fund managers. Immediately following the crash, the endowment value suffered great losses of 20-25 percent. Since then, the School, the Finance Committee and the Board of Trustees have outsourced to the consulting firm Angeles Investment Advisors, which oversees the fund managers Angeles hires to invest for the School. The Finance Committee also revised the Investment Portfolio Statement (IPS) and highlighted target investment areas and certain restrictions and qualifications that the Committee requires for investments after the 2008 crash. According to Hernandez, the IPS is meant to give general guidelines to the many managers that Angeles employs to invest for Marlborough, but within those instructions the managers have flexibility to invest how they see fit.
Hernandez pointed out that although the endowment is invested more on the conservative side, when a profitable investment opportunity arises outside the parameters of the IPS, the Committee takes deliberate and measured risks.
“On the equity side, if we are seeing that the market is doing well, we want to be a big part of that party as well,” Hernandez said, “We want to make sure we are able to appreciate and build value against the stocks we have.”
Hernandez said that he believes the market will continue to remain volatile in the next few months or so, but due to the foresight of the School, Finance Committee and the Board of Trustees, the School’s endowment will not be greatly affected.