3 When we endow something, we invite others to connect with a cherished part of who we are. At Lehigh, the endowment represents a vast collection of memories: of a mentor, experiences on campus, and the rich history and traditions that we secure and make accessible to generations of students. When we create an endowment, we hope that others will share in a piece of what made us who we are today while they build a future for themselves on campus and beyond. And it is the endowment and its strength that fuels that future for Lehigh students. The endurance of the endowment keeps Lehigh focused, preparing students and graduates to engage with the world and lead lives of meaning. Despite debates about the role of higher education today, Lehigh never wavers in turning successful students into bold leaders and innovators because of our collective action and the agility of the endowment. This year, Lehigh begins an exciting new chapter in its history with the implementation of the strategic plan, Inspiring the Future Makers, and the extension of GO: The Campaign for Lehigh into the bold engagement and fundraising goals of GO Beyond: The Campaign for Future Makers. We only need to look at what we have accomplished so far and where we are going to see the power of our shared impact. Last year, we united to champion more than 50% of our students who depend on financial aid and scholarships, providing that critical support with 304 endowed scholarships created during the public phase of GO: The Campaign for Lehigh. This semester, we welcomed 27 exceptional students to Lehigh as the inaugural Soaring Together Scholarship cohort, and we look forward to opening Lehigh’s doors to more people with the announcement of The Lehigh Commitment. Thank you for your support over the years and for your steadfast commitment to uphold the Lehigh experience for all current and future students. As chair of the Tower Society, I am deeply honored to stand with you. In the following pages, you will see how Lehigh has grown over the last year. You will read more about the success of GO and the new heights we will reach as we GO Beyond. Finally, you will see the current financial position of the endowment. The experiences and memories we cherish here on campus today, and those that are being fostered right now, will remain hallmarks of this great university because of you. Thank you. Go Lehigh! With warmest regards, Mike Caruso ’67 Chair, Tower Society Fiscal year 2023 was a tale of two halves as the first six months were essentially flat, and most of the gains were made in the final six months. As a result, we saw the endowment increase by 7.5%. Global equity markets started their recovery in the face of rising interest rates. There were no major asset allocation changes, but a slight overweight to absolute return has been a ballast and beneficial diversifier over the long term. Our diversified asset allocation was a contributing factor to the preservation of capital and a meaningful return generator during the year. The public equity asset class was the best-performing asset class, returning 20%, due to the global equity market recovery from an earlier sell-off in the technology sector. Our public market exposure benefited recently from the technology rally, partially driven by an increase in investments and awareness in AI and the supporting infrastructure from top technology companies. The absolute return portfolio was another bright spot, generating a 9% return and providing significant diversification benefits and positive performance across hedge funds, private credit, and opportunistic strategies. We are encouraged by the performance of our diversifying asset classes, which have continued to generate consistent return, uncorrelated to risk assets. The private equity portfolio was an underperformer as it felt the lagged and lingering effects of the previously mentioned technology sell-off and broad valuation declines. The real estate portfolio, however, held up well and had a positive return despite rising interest rates and major shifts in supply-demand dynamics. Private markets have slowed their investment deployment and fundraising, but we expect an increase in these activities heading into fiscal year 2024 and 2025. The endowment is set up nicely to take advantage of these opportunities. Lastly, rising interest rates continued to be a theme for the treasury portfolio. Overall, the treasury portfolio held up well and is in a strong position going forward with our decision to shorten overall duration, therefore reducing sensitivity to rising rates and repositioning the portfolio to capture an attractive yield opportunity. As we enter fiscal year 2024, we remain cognizant of the current market environment, which is characterized by rising interest rates, lingering effects of inflation, and geopolitical events. The endowment retains its flexibility with an appropriate cash balance, and we are taking advantage of the high-interest-rate environment by investing in short-duration fixed income that can generate a meaningful yield. Thank you for your ongoing support of the Lehigh endowment and the very important role it plays in advancing Lehigh’s strategic priorities and programs. Kristin Agatone Chief Investment Officer Cover: Honoring the past and boldly looking forward, Lehigh lights up the Lehigh Valley with the Health, Science and Technology building (HST). As the home of the College of Health, the HST inspires interdisciplinary research and positions Lehigh and its community to build a brighter future.
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