TH E BOT TOM LINE Oxy’s 2015-16 results underline the fundamental importance of the College’s endowment in providing an enduring source of revenue The 2015-16 fiscal year was a difficult one for college and university endowments, yielding the worst performance since the 2009 recession, according to Bloomberg. Occidental was not immune: As of June 30, 2016, the College’s endowment stood at $371 million, with a negative 3.9 percent return for the fiscal year. Given that result, it’s cold comfort that Harvard, Stanford, Columbia, Pomona, and many others also saw negative returns. The Board of Trustees investment committee necessarily takes the long view. Over the last 15 years, the Occidental endowment has earned an average annualized compound return of 6.1 percent. Our 2015-16 results, while disappointing, help illustrate the fundamental importance of the College’s endowment in providing an enduring source of support for Occidental. Since 1903, when it was launched with a three-year campaign that raised $202,000, Occidental’s endowment has generated a significant and reliable flow of funds to the College’s operating budget. By pursuing a sensible balance between the needs of the present and the needs of the future, the investment committee seeks to achieve several important goals: •E nsuring that a consistent level of funding will be available each year for the College’s more than 360 student scholarship funds, regardless of periodic market downturns. •P roviding a hedge against inflation and ensuring that the endowment’s buying power is preserved over time. •M aking budgeting a more predictable process and smoothing out what might otherwise be dramatic fluctuations in revenue.
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annual report
2015-2016
Overall, Occidental’s fiscal management has received high marks. Moody’s Investors Service recently confirmed the College’s Aa3 credit rating—fourth highest on Moody’s 21-point scale—based on our financial health, strong governance and management, and reputation as an elite liberal arts college. Forbes’ most recent Top Colleges Financial Grade list of private colleges gave Oxy an A, and the U.S. Department of Education’s Financial Responsibility Composite Score for Oxy is a 3.0—the highest possible. But strong budget management and even the best of annual returns cannot solve Occidental’s chief financial challenge: A modest endowment that currently produces only 16 percent of operating budget revenues. (At Harvard and Yale, the endowment produces roughly onethird of budget revenues; at Pomona, more than half.) With nearly 70 percent of operating funds coming from tuition revenues, Occidental is much more vulnerable to the vagaries of the admission process, in which a single year’s recruitment shortfall could have serious budget consequences. Whether it’s making an Occidental education accessible to talented students regardless of their background, offering competitive faculty salaries in a metropolitan area with a high cost of living, or keeping current with the latest technology, growing the endowment is key. This is why Occidental continues to make building the endowment our top fundraising priority. Amos Himmelstein Vice President & Chief Operating Officer