Overview of Investment Practice and Performance

Endowment gifts to Colby are placed in the institution’s Endowment Fund for investment and oversight purposes. Decisions regarding the investment of the Colby endowment are made by the Trustee Investment Committee working within a detailed set of guidelines designed to preserve and augment the value of the endowment. The trustees have adopted the broad objective of investing endowment assets so as to preserve the long-range purchasing power of both the principal and the endowment income available to support the College’s operations. In FY2010 the endowment provided $22.3 million, which was 17 percent of Colby’s operating budget.

The Board of Trustees seeks superior investment returns through a diversified, professionally managed portfolio. To achieve its investment objective, Colby retains independent investment firms, each of which pursues a specific portfolio management strategy. These firms are selected based on a number of factors, including the asset class in which they have expertise and the investment style they utilize. The Endowed Fund Statement of Investment Objectives and Policies governs the overall asset allocation targets and ranges.

The Board of Trustees is responsible for determining the annual spending formula percentage of the Endowment Fund, which is a balance between current income needs and long-term investment objectives. The  spending formula for the year ending June 30, 2010, was 4.75 percent of the average year-end market value for the past five years. This trailing method is used to smooth large year-over-year changes in market value, thereby allowing the College to more reasonably predict future distributions from the endowment. The spending formula was temporarily increased to provide budget stability during the recent economic turbulence. The spending formula returned to 4.5 percent in the current fiscal year (for the fiscal year ending June 30, 2011). To the right is a 10-year comparison of endowment market value
Endowment Target Allocation
pie chart showing endowment target allocation

Endowment Market Value
2001 $353,383,000
2002 $322,559,000
2003 $321,584,000
2004 $357,171,000
2005 $424,205,000
2006 $482,019,000
2007 $598,729,000
2008 $600,248,000
2009 $452,990,000
2010 $502,076,000