Report to donors on endowments and investments
Fiscal year ended April 30, 2023
Introduction
Mount Allison University aims to be the university of choice for students seeking an undergraduate education of exceptional quality. Mount Allison’s over 750 endowment funds, valued at more than $233 million, provide a strong base for funding to support the achievement of this goal.
Endowments are managed in a way that will provide future generations with the same level of support for scholarships, bursaries, teaching, research, and other educational programs as these endowments provide today. To achieve this, the University calculates the spending in any one year as five per cent of the lower of the current market value or the average of the 16 previous quarter market values of endowment assets, less any investment and administrative fees. Any investment returns that exceed the five per cent spending rate are added to the Endowment Fund to pay for those years when investment returns do not meet the spending rate or are negative, an approach consistent with other North American universities.
The University’s Endowment Management Policy requires the Board Investment Committee, with the assistance of the Administration and outside consultants, to regularly review the long-term investment prospects of our endowment’s asset allocation as compared to the amount we spend. This comparison between what we expect to earn as compared to the amount we expect to spend tells us whether adjustments should be made in order to achieve equity between generations of students. This analysis considers inflation and the investment fees that impact the portfolio.
In the current financial year, 2023-24, the University’s endowment funds are budgeted to provide $9.8 million in spending to support all aspects of the University, but primarily financial aid and academic activities.
The following chart shows how endowment funds are being used:
Endowment Spending
Investment Returns
The investment returns and accompanying risk are determined largely by the allocation of assets to different classes and strategies of investments. The asset mix of 70 per cent equities, 10 per cent fixed income, and 20 per cent other asset classes specified in the Endowment Management Policy was designed to meet Mount Allison University’s spending policy and capital preservation requirements.
The endowment funds have a long-term horizon, so investment performance is evaluated over a multi-year period. The following table shows the Endowment Fund one-year rates of return net of investment management fees as compared to benchmark returns from 2019 to 2023.
The University’s fiscal year end is April 30 and actual returns, both realized and unrealized, differ from the returns as of March 31. Many of the University’s investments are in U.S. funds, are not hedged for currency fluctuations, and from time to time exchange fluctuations can add to or detract from overall returns. As of April 30, 2023, this fluctuation detracted from the fund’s overall performance and the amount recorded as the overall return for the year then ended. Our spending policy means limited impact on annual spending from these fluctuations.
Of the 67 Canadian universities reporting on endowment funds, Mount Allison has one of the largest endowment funds per student at over $96,000.
Prudent management of the University’s endowments provides sustainable support of current and future generations of Mount Allison students. Further information concerning the University’s financial results is available at: mta.ca/financial