The consolidated endowment belonging to the Board of Visitors and all affiliated organizations supporting the university totaled $803.7 million as of the year-end reporting date of June 30, 2016. The decrease of $7.5 million, or 0.9 percent, from last year’s total of $811.2 million was attributable primarily to depreciation of investment balances held in the William and Mary Investment Trust (WAMIT), the largest of the investment portfolios.

For FY 2016, WAMIT had an investment return of -2.4 percent; comparatively, WAMIT’s blended Long-Term Policy Benchmark returned -1.2 percent. As is the case with most universities, substantially all of W&M’s consolidated endowment is invested in some form or fashion in the capital markets, domestic and foreign, which provide opportunities for growth, but with the assumption of risk. As described below, we did not complete the year with an investment return to our internal satisfaction. Despite the fact that we believe our return will be comparable to most universities, likely at the median once institutional survey results are released in January, we nonetheless underperformed our given internal benchmark and benefited from few areas that generated real positive return. Fiscal year 2016 was difficult for us in that our long term investment strategy has always been broadly based, casting a wide net over the array of opportunity sets, and this year the best results, aside from private equity, in hindsight came from old-fashioned investing in the S&P 500, where we and many of our brethren institutions now have limited exposure.

Endowment - Change over time

The WAMIT portfolio is constructed along asset class groupings — which are shown on the next page with the targeted policy allocation, actual investment allocation and associated returns as of June 30, 2016. Also shown are returns for the major asset class groupings of global equity, marketable alternatives, fixed income, and real assets over the last 1-, 3-, 5- and 10-year periods.

Domestic Equity, with the portfolio’s largest allocation among asset classes — representing all cap sizes, returned -3.0 percent underperforming its benchmark of the broad Russell 3000 Index that returned 2.1 percent. Comparatively, the universally known S&P 500 Index returned 4.0 percent. WAMIT has long had a strategic overweight to value equity. This year, WAMIT’s value style practitioners underperformed by a disappointing margin, accounting for the disparity between actual performance versus broader market benchmarks.

Foreign Equity invested in developed regions of Europe, Asia and the Far East had a portfolio representation of approximately 15.3 percent on June 30. Investment performance of -6.7 percent exceeded the MSCI EAFE Index return of -10.2 percent by a healthy 3.5 percent differential. Emerging markets continued to be a challenging environment in 2016, however, WAMIT’s performance of -6.5 percent was impressively better by a factor of 5.2 percent than the MSCI Emerging Markets Index return of -11.7 percent.

William & Mary Investment Trust

WAMIT’s exposure to Marketable Alternatives comes in two component asset classes: Absolute Return and Special Situations. Generally, investments in Absolute Return are designed to consistently produce a positive return that would at a minimum equate to the yield of inflation plus spending (typically high single digits). Investments in Special Situations are opportunistic in nature and consequently reflect strategies that seek to maximize returns from situations perceived to be temporary aberrations in market pricing or where specific financing or strategic asset holdings can measurably improve the quality of a company’s balance sheet. Together, Absolute Return and Special Situations comprised 22.1 percent of the WAMIT portfolio as of June 30, 2016, and produced a -5.1 percent return. Individually, managers in the Absolute Return category returned -6.2 percent, modestly underperforming the benchmark HFR Fund of Funds Composite return of -5.4 percent. Managers in Special Situations collectively produced a -2.4 percent return, exceeding the HFR Distressed Securities benchmark that returned -5.4 percent.

Private Equity constituted approximately 16.0 percent of total assets at June 30, 2016, up from allocations of 14.0 percent in 2015, 11.5 percent in 2014, 10.6 percent in 2013, 9.3 percent in 2012 and 6.6 percent in 2011. WAMIT’s private equity investments returned 10.4 percent in 2016, significantly outperforming the benchmark Russell 3000 Index that returned 2.1 percent. WAMIT’s solid private equity return in 2016 follows a similarly strong performance in 2015 with a 20.9 percent return for that asset class. New commitments made to private equity during FY16 and an acceleration in capital calls contributed to the growth in size allocation. Notable realized and unrealized gains were recognized in many underlying portfolios as many private companies either were bought or went public at high multiples and others marked up in successive rounds of private financing. Having a sizeable stake in the private markets bodes well for the portfolio as private equity offers attributes and characteristics different from the public markets, and consequently this asset class serves as both a diversifier of risk and a source of increasingly meaningful investment return.

The Fixed Income portion of the portfolio returned 5.5 percent for the fiscal year. This compares to the 6.0 percent return of the Barclays U.S. Aggregate Bond Index. In Real Assets, an asset class comprised of investments in commodities, natural resources (oil, gas and timber) and equity real estate, WAMIT’s blended exposures had a combined return of -1.6 percent, generously outperforming the benchmark Bloomberg Commodity Total Return Index of -13.3 percent. Performance in Real Assets was impacted by the continuation of depressed global oil prices and weak demand for commodities in general, however, selected holdings in domestic real estate and timber delivered impressive double-digit returns that mitigated the downdraft. The Real Assets category is one area of the portfolio undergoing change with commodity exposure being reduced and equity real estate being increased. At June 30, 2016, Fixed Income carried a 5.2 percent weight in the portfolio, Real Assets a 7.2 percent weight, and Cash a 2.8 percent weight with a corresponding amount slightly under $16 million.

As of June 30, 2016, the College of W&M Foundation’s (CWMF) Investments Committee had oversight responsibility of approximately $564 million in investable assets contained within WAMIT. At that time, representative ownership in WAMIT consisted of 83.4 percent belonging to the CWMF, 6.1 percent belonging to the Marshall-Wythe School of Law Foundation, 6.3 percent belonging to the W&M Business School Foundation, 2.1 percent belonging to the VIMS Foundation and 2.1 percent belonging to the Murray 1693 Scholars Foundation. Collectively, investments held in WAMIT by these five grantor organizations represent approximately 70.2 percent of the $803.7 million in total endowment resources that benefit the university.

This year, WAMIT again received an unqualified opinion from its auditors, Deloitte & Touche LLP. As reported in its financial statements, WAMIT’s net assets decreased by approximately $14.6 million. This decrease was attributable to the following: $22.6 million in contributions from existing grantors, $23.3 million in withdrawals for budgeted spending, and a $13.9 million decrease in net assets resulting from investment operations.

Investment results