After the unprecedented gains of the previous fiscal year, the endowment suffered its first negative year of returns since 2016. Equity markets dropped precipitously as investors reacted to higher inflation and Russia’s invasion of Ukraine. Inflation also triggered a tightening monetary policy. Central bank policy rates rose at the fastest pace in decades, driving bond prices down significantly. In fact, with both stocks and bonds in negative territory, it was the worst year for a traditional 60/40 stock and bond portfolio since the Global Financial Crisis of 2008. Alternative investments and strong fund selection enabled the invested pool to protect the extraordinary gains from fiscal year 2021 and close the fiscal year above $1 billion in total assets.
Spending from the endowment has grown every year over the last decade, generating cumulative distributions of $354 million over a decade. Today it is the second-largest revenue source after tuition and accounts for about a third of the College’s revenues. In fiscal year 2022, distributions from the endowment equated to almost $18,000 per student.
Over the past 15 years, the endowment has grown from $608.7 million to $1,002.5 million. This represents a 6.6% investment return per year, net of investment expenses and excluding new gifts. This result places it in the top quartile when compared with hundreds of peer institutions. More importantly, this return has achieved the goal of supporting the operating budget while preserving, and even growing, the purchasing power of the endowment for future generations.
Fiscal year 2022 was the second full year of operation for the College’s Investment Office in Boston. The Investment Office was established on April 1, 2020, and is responsible for the management of the endowment investment portfolio, including asset allocation and portfolio structure and positioning, as well as sourcing, selecting and monitoring investments. Responsible to the Board of Trustees for oversight, the Investment Committee works with the Investment Office to oversee the endowment and maintains the fiduciary responsibility of investing the College’s assets.
The Investment Office and the Investment Committee remain focused on long-term portfolio growth to ensure that the endowment continues to support the College’s mission. The long-term growth objective means that the portfolio is tilted toward investments in equity and equity-like instruments across public and private markets. The endowment seeks to establish long-term partnerships with specialized external investment managers. These partners tend to build their investment portfolios through deep fundamental research.
