DISCIPLINE: Important
in Science and Investing

A decade ago, the trustees embarked on a new course for managing the Carnegie endowment. And I’m happy to report that the strategy has proved to be highly successful, particularly during this time of market volatility. In 1992, the finance committee decided to allocate the endowment portfolio among three broad asset classes: alternative assets such as real estate and energy investments, domestic and international stocks, and fixed income and cash. The major component to our strategy, spearheaded by David Swensen, the chairman of the finance committee, is a relatively large allocation to alternative assets. The result of this approach is that over the past five years the Carnegie endowment has grown by 10.3% versus an average growth of 6.1% at similar institutions. Our success continued through the fiscal year ending June 30, 2002. During that period, similar endowments declined by 4% on average, while the Carnegie endowment grew by 3.1%. The key to our healthy financial situation has been sound decision making and discipline. When markets behave erratically, the temptation is to chase gains. But the Carnegie trustees stayed firmly on track, and this discipline has paid off. We have also been disciplined spenders and cost conscious in other ways. Through the efforts of Carnegie president Maxine Singer and the department directors, we continue to maintain our goal of keeping endowment spending below 5% of the endowment’s value. A decade of successful fund-raising activities, orchestrated by Director of External Affairs Susanne Garvey, has also brought money into the institution and raised our public profile. Because of these fiscal strengths, Carnegie’s long-term debt rating was raised by Moody’s to a triple A status—a rating level achieved by only some 20 other institutions in the country. This status, in turn, will help us keep down the costs of financing the construction of Embryology’s new Maxine F. Singer Building in Baltimore. The scientific staff has also contributed to our fiscal health. Many researchers have been very successful in obtaining grants and initiating collaborations with outside organizations, which pool collective resources. Others have come up with ingenious and cost-efficient ways to design instrumentation. As we all know, first-rate science requires first-rate facilities. The fiscal responsibility of everyone in the institution has helped us sustain and improve these essential resources. And this helps us achieve our ultimate goal—to maintain world leadership in basic research. I thank you all for your contributions.

—Tom Urban Chairman