In a year marked by steep declines in financial markets across the globe, the Brown University endowment generated a -4.6% investment return during Brown’s Fiscal Year 2022, which closed on June 30, 2022.
With a $315 million decline in investment assets, a $207 million contribution to Brown’s operating budget and the addition of $133 million in endowed gifts, the endowment’s total market value decreased from $6.9 billion to $6.5 billion during the year.
Despite the decrease in value, the University outperformed broad market indices like the S&P 500, which generated a -10.6% return over the same period. Brown surpassed the return of Cambridge Associates’ preliminary mean (-6.0%) and median (-6.0%) returns for colleges and universities, a key benchmark for higher education institutions.
Vice President and Chief Investment Officer Jane Dietze said that the Investment Office’s charge is to protect and prudently grow the endowment over time, to ensure its role as an enduring financial resource that provides long-term support for students and advances Brown’s mission of research and teaching. Brown’s investment strategy is therefore designed to achieve strong risk-adjusted returns over decades rather than over the course of any single year.
“While recent years have been rich with opportunities to grow the Brown endowment, Fiscal Year 2022 proved to be a moment when the protection of assets was our paramount goal,” Dietze said. “As the world grappled with continued negative impacts of the COVID-19 pandemic, new geopolitical conflicts, the highest inflation rates in decades and monetary tightening by central banks, markets delivered substantial losses across the board. Brown continued to outperform both broad indices and market-based benchmarks, and our long-term focus ensures that the endowment will provide critical funding for scholarships, research and other University priorities for generations to come.”
A foundational financial resource for the long term
Brown’s endowment is a collection of charitable gifts designated by donors to be spent for specific purposes and invested by the University. Among more than 3,300 individual endowed funds that comprise the Brown endowment are funds that support financial aid to allow students to graduate debt-free; professorships to recruit leading researchers and educators; labs and public health space to help develop treatments and cures and address health crises; community engagement initiatives; academic programs to prepare the next generation to address societal challenges; and teaching and research in areas such as climate change.
Each year, the endowment contributes funding to Brown’s operating budget, with the annual payout rate ranging from 4.5% to 5.5% of the average market value. Endowed funds for financial aid are particularly crucial, with the largest share of the endowment’s annual budget contributions (32%) designated for scholarships, fellowships and prizes. Among current Brown undergraduates, 45% of students receive need-based financial aid with an average aid package of $59,365, which covers approximately 71% of the full cost of attendance.
With Brown’s investment program predicated on executing a repeatable investment process rooted in prudent risk management, the University’s Fiscal Year 2022 return followed more than a decade of progressive growth and, in Fiscal Year 2021, one of the most exceptional single-year investment returns in Brown history, at 51.5%.
Over the last decade, the endowment has produced $4.8 billion in investment gains and provided $1.8 billion to support Brown’s educational mission. Average annualized returns for Brown’s endowment for 3, 5, 10 and 20 years are 17.4%, 15.5%, 12.3% and 10.0%, respectively.
That substantial growth in recent years enabled the Brown endowment to contribute $207 million to the operating budget in Fiscal Year 2022 (16% of the total budget), despite the challenging investment environment. With the endowment’s budget contribution smoothed over a 12-quarter basis to account for years when financial markets decline, the contribution marked a 6.7% increase compared to last year.
Dietze noted that even in a challenging year for investors globally, Brown’s investment performance was driven by the same values that guide the endowment’s stewardship every year: partnerships with outstanding investment managers; diversification across asset classes, geographies and industries; enthusiastic support from the Brown community; and prudent risk management executed by a committed team of investment professionals with oversight from an engaged Investment Committee.
“We’re deeply grateful to the investment managers that invest on Brown’s behalf, to our internal investment team that is committed to Brown's mission of scholarship and research, and to our equally committed Investment Committee volunteers,” Dietze said. “Even as we navigate periods marked by turbulent markets, we’re demonstrating together how to create a portfolio that, over decades, grows the purchasing power of the endowment to support all of Brown’s scholars, now and in the future.”
Original source can be found here.
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