The James Madison University Foundation utilizes a global, broadly diversified asset allocation strategy to achieve the long term investment objectives of the Foundation to support the University.  The current allocation includes domestic, international and emerging market public equities, hedge funds and fixed income, and seeks to provide strong risk adjusted long term investment returns over market cycles.

Chart of LT asset allocation

Capital market returns for fiscal year 2016 were challenging for globally oriented, diversified portfolios.  During this fiscal year, global capital markets experienced two meaningful market corrections of over 10% within two quarters of each other.  The first occurred in the summer of 2015 before quickly recouping those losses by early November.  January 2016 began with the weakest start in history before rallying sharply later in the quarter.  The S&P 500 returned +4% over the past year, but global equity returns were negative across the board with developed international equity returns -9.7% and emerging market returns -11.7%.  US small cap equities were -6.7%.

Continued global central bank policies of zero or negative interest rates positively impacted fixed income returns over the past year as the US 10-year treasury rate dropped to a historic low yield of 1.38%.  Over the past twelve months, US fixed income returns were +6% despite warnings by the Federal Reserve Bank that interest rates would start to increase over the course of 2016.

The James Madison University Foundation’s diversified portfolio was not exempt from market challenges, declining 3.58%.   Over the past five years, the Foundation’s portfolio has returned +5.5%, modestly outperforming global equities returns with lower volatility.  Since late 2014, the investment committee has been working to improve the asset allocation strategy and the manager roster of the Foundation’s portfolio.  Significant progress has been made over the past year and the portfolio is well positioned for the future.

In FY16, the total market value of endowment assets decreased from $81.9 million to $80.0 million. The decline in the market value is the result of the negative return, adjusted for the annual support draw and new gift additions to the endowment portfolio.  The endowment provided $3.6 million of support to the University in FY16, an increase of over $300,000 from the previous year.

Graph of Endowments @ Mkt Value
Graph of Endoment Designations

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