Home > News > Asset Allocation > Cornell, Penn State Endowments Return 5.3%, 7.7% for Fiscal 2019
Asset Allocation

Cornell, Penn State Endowments Return 5.3%, 7.7% for Fiscal 2019

Cornell endowment hits record $7.3 billion, Penn State tops $3.1 billion.
By Michael Katz

The investment portfolio of Cornell University’s endowment returned 5.3% for the fiscal year ending June 30, raising its total asset value to a record $7.3 billion.Penn State’s endowment reported that its portfolio earned 7.7% for the same fiscal year increasing its value to $3.11 billion.

Cornell CIO Kenneth Miranda called fiscal 2019 returns “a solid result” in a statement, considering “our efforts to restructure the portfolio and the constraints that come with those efforts.” Miranda added that “we’re seeing a lot of very promising indicators across asset classes as we work to get our portfolio positioned correctly.”

Cornell said real estate and equities led the endowment’s performance this past year.We are continuing to reposition the portfolio,” Miranda added, “slightly constrained by the illiquidity [assets not easily converted into cash] associated with many legacy investments that we’re working to convert into new positions.”

The university’s public and private equity investments returned 9.2%, Private equity led returns bringing in 18.2%.

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Real estate returned 10.9%, outperforming its benchmark’s return of 6.5%. Over the past three fiscal years, the portfolio’s growth is a “respectable” 9.4%, Miranda said.

Penn State University’s Endowment’s 7.7% returns were just below last year’s return of 7.8%, but stayed above the benchmark.

The endowment reported three-, five-, 10-, and 20-year annualized gains of 9.3%, 6.0%, 9.8%, and 6.9% respectively, outpacing its passive benchmark..

As of June 30, Penn State’s long-term investment pool, which includes the endowment plus $1.36 billion in non-endowed funds, was 48% invested in listed equities; 21% in private equity; 13% in diversifying/hedged/private credit strategies; 11% in fixed income/short-term investments, and 7% in real assets.

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Home > News > Risk > Michigan Pension Fund Seeks Benefits Reduction
Risk

Michigan Pension Fund Seeks Benefits Reduction

Detroit Carpenters plan to become insolvent in 15 years without government intervention.
By Michael Katz

The Michigan Regional Council of Carpenters and Millwrights union has applied for a reduction of benefits with the US Treasury Department in a move to help prevent the Detroit Carpenters’ Pension Trust Fund from becoming insolvent.

The Treasury Department has approved the last 13 benefits reduction applications, and hasn’t denied such a request since May 2017 when it rejected the application submitted by the Automotive Industries Pension Fund. Since the Kline-Miller Multiemployer Pension Reform Act of 2014 was enacted the Treasury department has approved 14 benefits reduction applications, rejected five, and four are currently under review, including the Detroit Carpenters’ Pension.

“We worked hard to keep the cuts equitable and fair,” said the plan on its recovery program website. The plan added that if the application is not approved and the plan becomes insolvent, “participants will have to rely on the shaky Pension Benefit Guaranty Corporation (PBGC) for an even lesser benefit.”

In 2018, the plan’s actuary certified that the pension was in critical and declining status for the plan year beginning May 1, 2018. As of that date the plan’s funded percentage was 34.5%, and the actuary projected that without any action the plan would become insolvent during the plan year ending April 30, 2036. [Source 2]

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The benefits reduction application was submitted on Sept. 23, and the Treasury Department has 30 days from that date to post the application on its website, and 225 days to complete its review. If the application is granted, approved, and adopted the proposed suspension will take effect on July 1, 2020.

“This has been perhaps the most difficult decision the board has ever had to make,” said the plan. “Reducing pensions for current retirees and beneficiaries is not something we ever thought we’d have to do. If the pension recovery program works as we expect it to, the result will be a pension plan you can count on for generations to come.”

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