The Massachusetts Institute of Technology (MIT) and Brown University endowments each returned more than 50% for the fiscal year ending June 30, with MIT’s endowment returning 55.5% and Brown’s endowment returning 51.5%
For MIT, it was the fund’s strongest annual performance in more than 20 years and raised its portfolio’s asset value to $27.4 billion. As a result, the university plans to increase the endowment’s payout by 30% starting in fiscal year 2023, which begins July 1, 2022.
“This is a once-in-a-generation opportunity, and we must use it in a way that inspires big ideas and builds a stronger MIT at a time when the world needs breakthroughs in science more than ever,” President L. Rafael Reif said in a statement.
MIT’s investments that are managed by external managers include its allocations in absolute return; domestic, foreign, and private equity; real estate; and real asset commingled funds. Private equity is the portfolio’s biggest holding at nearly $11.7 billion, or almost 43% of its total asset value. Private equity investments have buoyed endowment portfolios this past year, helping them to post a median gain of 27% during fiscal year 2021, according to Wilshire Trust Universe Comparison Service data.
“We identify exceptional investment managers from the bottom up and build long-duration partnerships with them rather than focusing on top-down asset-allocation targets,” Chief Financial Officer (CFO) Marianthe Mewkill said in an interview with MIT’s alumni newsletter Corridor. “We spend enormous effort identifying investment managers who are likely to thrive over the long term: those with patience, high ethical standards, a focus on high-quality assets, and superb investment judgment.”
Meanwhile, Brown University’s endowment portfolio returned 51.5% during fiscal year 2021, ahead of its benchmark portfolio’s 43.1% return, to raise its endowment’s market value to $6.9 billion.
Over the fiscal year, Brown’s endowment contributed $194 million to the university’s operating budget, which represents 15% of the total budget. More than 3,300 individual endowed funds make up Brown’s endowment, which provides funding support for university initiatives such as Brown’s plans to contribute $125 million toward creating an academic health system for Rhode Island.
Brown’s portfolio of investments can divided into three major classes: public equity, private equity, and absolute return. Public equity investments represent 19.8% of Brown’s endowment and generated a 58.9% return. Private equity accounts for 39% of the endowment and returned 86.8%. And absolute return accounts for 24.8% of the endowment and generated a 15.3% return.
Brown said that with pandemic-related expenses of more than $55 million for COVID-19 testing, personal protective equipment (PPE), and emergency funds to allow students to study remotely, and revenue declines of more than $30 million due to the cancellation of some programs, the university ended the fiscal year with a $52.2 million operating budget deficit.
“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,” Provost Richard Locke said in a statement.