PROVIDENCE, R.I. (WPRI) — Brown University announced Thursday that the value of its endowment has jumped to $6.9 billion, buoyed by a surge in financial markets during the pandemic that has also lifted the assets of other major institutions.
Brown said the endowment achieved a 51.5% investment return the 2020-21 fiscal year, which ended June 30, for a total investment gain of $2.4 billion. School officials called the result “extraordinary,” comparing it favorably to the 43% return achieved by the portfolio Brown uses as a benchmark. The S&P 500 index returned 41% over the same period.
The endowment is a collection of charitable gifts spread across more than 3,000 separate funds, and it throws off investment income each year that Brown can put toward its annual budget. In 2020-21, the endowment accounted for $194 million of Brown’s entire operating budget, or about 15% of the total. Brown said about one-third of that money went toward financial aid for students.
“The endowment is a foundational financial resource for Brown’s academic mission, ensuring that no student who aspires to attend the university will encounter cost as a barrier and that Brown scholars contribute locally and globally through high-impact research, teaching and public engagement,” Brown Provost Richard Locke said in a statement.
Broken out by asset classes, the largest segment in Brown’s investment portfolio — private equity — returned 87% for the year. Public equity investments posted a 59% return, and so-called “absolute return” funds generated a 15% gain.
“The success of our investment team in ensuring the endowment’s ability to enable Brown to address critical and complex problems in the world is nothing short of remarkable,” Locke said.
Improving the performance of its endowment has been a long-term goal at Brown, which is still the most tuition-dependent university among its peers in the Ivy League.
Brown isn’t an outlier. As The Wall Street Journal wrote last month, in an article that highlighted the school’s financial gains: “Large college endowments have notched their biggest investment gains in decades, thanks to portfolios boosted by huge venture-capital returns and soaring stock markets.”
Harvard had a $42 billion endowment as of 2020, but has not yet announced its investment results for the last fiscal year.
Still, the eye-catching investment success could also be seen as somewhat of a public-relations headache for Brown President Christina Paxson and her senior advisers. While the sea of cash will help the school afford projects over the long term, it will also likely trigger another round of questions about how Rhode Island’s wealthiest institution is using its resources.
Locke noted that Brown finished the 2020-21 fiscal year with a $52 million operating deficit. Ending the year in the red has been an ongoing issue for the school, but he said it was exacerbated by the coronavirus pandemic, which led to over $55 million in related expenses as well as a loss of over $30 million in revenue tied to cancelled programs.
Since the amount of investment income from the endowment that can be applied to Brown’s annual budget is calculated based on the return over the previous three years, the school said the huge increase from 2020-21 will lead to bigger payouts in the coming years.
“Over time, the positive impact of this year’s historic return will have a transformational effect on Brown’s financial support for the work of current students, faculty and staff, for future generations of scholars, and the impact we can make on some of the most pressing challenges facing society,” Locke said.
Over the long-term, Brown said the endowment’s investment return averaged 24% over the last three years; 20% over the last five years; 13% over the last 10 years; and 10% over the last 20 years.
The big year for the endowment coincided with a change in leadership in Brown’s Investment Office. Joe Dowling, who was appointed in 2013 to bolster the school’s financial returns, departed in January for the investment firm Blackstone Group after having previously scaled back to a part-time position. He was replaced by Jane Dietze, now Brown’s chief investment officer.
Ted Nesi (firstname.lastname@example.org) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter, Facebook, LinkedIn and Instagram