Princeton Joins Peers Reporting Huge Losses

In a letter, Princeton President Shirley M. Tilghman said the school had actually preserved some of the endowment’s value by declining to withdraw cash from the endowment for operating expenses – instead, funding its budget from other sources, including a $1 billion bond offering – and instituting budget cuts, the Wall Street Journal reported. Still, Tilghman warned that the school, which has instituted salary freezes and halted building projects, could face layoffs this fall.

Princeton said its investment pool fell to $12.6 billion on June 30, down from $16.3 billion a year earlier, when the university had higher education’s fourth-largest endowment, after Harvard, Yale, and Stanford. The Princeton endowment’s loss was worse than the 18% decline of the median large endowment reported by consultant Wilshire Associates, the news report said.

The college’s investment loss was similar to those of Harvard and Yale, which share a strategy favoring illiquid alternative investments, including private equity funds, commodities, and real estate (see Yale Follows Harvard with Deep Endowment Losses ).

Tilghman said Princeton’s trustees and its endowment board are “reviewing our overall investment strategy and considering ways to further buffer the university from future severe downturns.” She said the review’s early stages suggest “marginal, not radical, changes.”