The company that oversees the University's assets reported it successfully managed the endowment last year.
The fund in which most of the endowment is invested returned about 17.5 percent last year, far above the 9.9 percent earned by the standard market benchmark, said Duke Management Company officials in a presentation Wednesday.
DUMAC, a non-profit corporation formed by the University's Board of Trustees about four years ago, is charged with investing the University's $1.46 billion in assets. The University's endowment of about $600 million ranks among the smallest of its peer institutions.
The Board of Trustees received a report from DUMAC this past weekend.
Most of the University's endowment is invested in DUMAC's long-term pool, which holds the most risk but also generates the highest return of DUMAC's three main funds.
The amount of money earned from investing the endowment relative to its size ranks Duke in the top half of the 25 largest university endowments' returns, said Andrew Golden, DUMAC investment director.
"According to most of the measures that we know about, they're fully consistent with the returns of the very best university endowments of comparable size," said Roy Weintraub, acting dean of the faculty of Arts and Sciences.
The University is budgeted to spend an amount of money equal to 5.5 percent of the endowment annually, Golden said. All additional money is placed back into the endowment.
To maintain the size of the endowment relative to inflation, DUMAC needs an annual average return greater than 10 percent.
DUMAC's intermediate- and short-term pools, which carry lower levels of risk and generally report lower returns, had mixed results.
The $90 million invested in the intermediate-term pool has not done as well as standard industry benchmarks, said Mike Hennessy, the DUMAC portfolio strategist in charge of the pools.
During the last two years, the pool has returned an average of 6.4 percent annually, much less than the 8 percent returned by its benchmark.
Hennessy said the lackluster returns result from poor investment decisions made when the fund was instituted about two years ago.
Too much of the pool's money was held in cash and in mortgages, which performed poorly relative to the rest of the market, he said.
During the last half of 1993, the pool has performed better, giving marginally higher returns than the industry benchmarks.
The short-term pool returned 3.5 percent in 1993, marginally better than the benchmark. Departments that need ready access to their money are the biggest investors in the pool, which contained more than $250 million at the end of 1993.
Beginning Jan. 1, DUMAC replaced its short-term pool with a new institutional reinvestment account. The account will work like a bank--DUMAC will keep enough cash on hand to meet its investors' needs and will place the rest in longer-term, higher-interest earning investments. Any sector of the University that invests in the account is guaranteed a return 10 percent higher than the pool's benchmark. Profits from this account are funneled to the Office of the President.
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