Endowment Report 2021-2022

As with anything we cherish deeply, we strive to ensure its strength and longevity. To see this in action, we only have to look at what we have done here at Lehigh. Together, we’ve gathered our accomplishments, memories

Fiscal year 2022 was challenged by significant volatility across asset classes including both equities and fixed income. As a result, we saw the endowment decline by -2.7%. While nobody could have fully anticipated the extent of the decline in global markets, we were mindful of the frothiness of valuations coming into

of dear friends and life-changing mentors, and our proudest traditions to preserve them for generations of Lehigh students. More than a legacy, an endowment is a promise that the same Lehigh experience that shaped us will continue long after we are gone. Though times may be turbulent at home and abroad, Lehigh not only endures, but thrives because of the strength of its endowment. Collectively, we impact so much of what makes Lehigh what it is. We unite to champion the 50% of our students who depend on financial aid and scholarships, providing that critical support with more than 282 endowed scholarships created during the campaign. We join in carrying Lehigh’s spirit across the globe with our students to 53 host countries because of the Iacocca International Internship Program. This spring we are looking toward the future as we discuss our strategic plans, which will chart Lehigh’s course and mission well into the next decade. Yet, we would not be Lehigh without recognizing our past. This semester, we began the renovation of the Clayton University Center, to breathe new life into its founding spirit of collaboration and community. Finally, we also honor the impactful legacy of Lehigh’s first coeducational cohort by welcoming applications for Soaring Together Scholarships from the Class of 2027. Lehigh’s history, our history, moves forward. So much of that momentum happens because of you. Your generosity and belief in Lehigh’s endowment is what secures and shapes our shared legacy, allowing it to live on. Our ideals and memories made during our time at Lehigh proudly exist today because of all of our efforts and care. Thank you for your support over the years and for your steadfast commitment to enshrine the Lehigh experience for all current and future students. As chair of the Tower Society, I sincerely thank and am deeply honored to stand with you. In the following pages, you will see how Lehigh has grown over the last year. You will receive an update on GO: The Campaign for Lehigh, as well as an understanding of how your generosity impacts students and faculty across our campus. 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.

the year and continued to prudently rebalance the equity portfolio. In addition, with the full support of the Investment Committee, we judiciously reduced the target allocation of our public equity exposure coming into fiscal year 2022 to protect from a potential negative shock to markets. These asset allocation decisions were contributing factors to the preservation of capital and meaningful excess return generated during the year versus global benchmarks. The result of performance during the year for both endowment and university assets was an ending value of $2 billion. While the public equity asset class generated negative performance consistent with the precipitous decline in equity markets, we were able to offset losses with significant positive performance across the real estate, absolute return, and private equity asset classes. The real estate portfolio was the top performing asset class, generating a +22% return through both meaningful rental growth and higher sales prices. The absolute return portfolio generated an +11% return with consistent positive performance across hedge funds, private credit and opportunistic strategies. The private equity portfolio generated an +8% return with positive performance across venture, growth equity and buyout strategies, despite write-downs to capture the multiple compression and overall negative market environment. The treasury portfolio, while marginally negative, held up well as we shortened the overall duration, therefore reducing sensitivity to rising interest rates and repositioning the portfolio to capture an attractive yield opportunity. Our private market exposure has meaningfully increased over the last several years from a combination of both positive performance and a tremendous pipeline of investment opportunities. Looking forward, we expect the significant growth in endowment assets to provide greater flexibility in our asset allocation to take advantage of illiquidity premiums in private markets. In addition, we continue to be encouraged with the performance of our diversifying asset classes, including absolute return and real estate, which have continued to generate consistent return, uncorrelated to risk assets. As we enter fiscal year 2023, we remain vigilant of the current market environment which is characterized by a continued decline in equity markets exacerbated by historically high inflation and rising interest rates. We remain nimble by maintaining a high cash balance that will allow us to hedge our overall market exposure as well as take advantage of volatility and multiple compression once the market stabilizes. One positive outcome of the current rate environment is that in stark contrast to the last several years, our high cash balance can generate a meaningful yield while patiently seeking a safer entry point. 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

Thank you. Go Lehigh! With warmest regards, Mike Caruso ’67 Chair, Tower Society

Cover: The Linderman Library Rotunda remains an iconic feature of Lehigh’s campus, serving generations of students as a hub for study and quiet socialization. From its majestic stained glass dome, to the original iron spiral stairs, the rotunda represents Lehigh’s enduring legacy.

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