Office of Investment Management
Investment of Endowment Assets
The University’s endowment plays an important role in supporting Pepperdine’s academic mission. Within the context of appropriate risk/reward and diversification, the primary objective of the endowment’s policy and management is to ensure the preservation of its inflation-adjusted purchasing power net of spending distributions. It is imperative that the purchasing power of the endowment be preserved in perpetuity to sustain a growing and reliable flow of funds.
The endowment portfolio is invested for total return with a goal to generate net returns in excess of inflation plus 5.5%. The current asset allocation is broadly diversified among marketable and non-marketable equity and fixed-income securities. A 45% allocation to absolute return, private equity, and inflation hedged strategies seeks to exploit inefficiencies in traditional and nontraditional markets. These alternatives offer a low volatility and low correlation strategy to stocks and bonds.
As of November 30, 2006, the total endowment was valued at $585.6 million. The endowment distributes 5% of its market value (based on a 5-year moving average) and in FY 2006, the distribution represented 10% of the operating budget, including scholarships. Investment policy has changed in recent years to increase the endowment’s expected return without materially increasing expected risk. It strikes an appropriate balance between skillful portfolio construction and prudent spending policies. The endowment’s successful management will make a difference for generations to come.