10 Lehigh’s Investment Office manages the day-to-day operations of the investment program. The office is under the fiduciary oversight of the Investment Subcommittee of the Board of Trustees and is led by the chief investment officer. In the management of the endowment, there are three primary objectives. Financial Objective The principal financial objective of the investment program is to preserve and, if possible, enhance the real purchasing power of the endowment principal in order to ensure the university’s financial future. The endowment must strike a balance between the preservation of principal in real terms and support of the university’s current operating needs. Investment Objective In order to achieve the financial objectives of the investment program, the investment goal of the endowment is to generate a real return of 5% annualized (net of inflation) over the long run. The 5% real return goal is expected to allow the university to grow the principal of the endowment in order to support future generations’ needs and to maintain its current spending objective, which supports near-term university operations. It is understood that the asset allocation of the endowment will be the primary driver of its performance over time. The Finance Committee and Investment Subcommittee set the asset allocation policy that is expected to achieve the 5% real return investment objective. While the Finance Committee and Investment Subcommittee set the asset allocation policy, the Investment Office is responsible for the implementation of the policy and the day-to-day management of the endowment. Spending Objective The endowment spending policy provides for a spending amount based on 5% of the twelve quarter moving average market value of the endowment with a minimum increase of 0% and a maximum increase of 10% over the prior year’s payout. The spending distribution from each endowment fund is used to support the purpose as specified in the endowment agreement between the donor and the university. In October 2018, the Finance Committee approved a modification of the minimum and maximum increases of 0% and 10% to –2% and 5%, respectively. The university will transition to this new policy collar during fiscal year 2022. Endowment Management Endowment Overview Fiscal year ending June 30, 2021 Civil engineering students get hands-on experience with the structural realities of bridge building.
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