With 12.1% return, Brown endowment grows to record $4.7 billion

The endowment provided $171 million to the University’s operating budget in Fiscal Year 2020, with contributions supporting student financial aid, faculty research and strategic priorities in an uncertain financial environment.

PROVIDENCE, R.I. [Brown University] — The Brown University endowment generated a 12.1% return during Fiscal Year 2020, significantly outperforming its benchmarks. At the close of the fiscal year on June 30, 2020, the endowment’s value stood at $4.7 billion, an all-time high.

Brown’s 12.1% return surpassed both the preliminary return of its benchmark portfolio (3.1%) and Cambridge Associates’ preliminary mean (1.3%) and median (1.1%) returns for colleges and universities. Over the last decade, the endowment has produced $3.2 billion in investment gains and provided $1.6 billion to support Brown’s educational mission.

Jane Dietze, the University’s vice president and chief investment officer, credited Brown’s partnerships with exceptional investment managers for the portfolio’s performance. She cited the portfolio's emphasis on risk management as the key to outperforming in an extraordinarily volatile year as financial markets struggled to adapt to the changing conditions brought on by COVID-19.

“This has been a year filled with unique challenges for Brown and for communities across higher education,” Dietze said. “We’re grateful to an outstanding group of external investment managers who collectively have exercised measured judgment in the face of historic volatility in the financial markets, and to our investment committee for the steady guidance it provides year after year.”

Dietze noted that Brown’s endowment portfolio is constructed to be flexible and adaptable to changing conditions — characteristics that were necessary in FY 20’s unique environment. The University’s Investment Office team is diligent and dedicated in seeking out and partnering with investment managers with high levels of ability and integrity, she said.

The endowment provided $171 million to the University’s operating budget during FY 20, a contribution that represents approximately $17,000 per student and 14 percent of Brown’s total operating budget. Endowment funds support a wide variety of strategic priorities at Brown, including financial aid, professorships, academic programs, teaching and research.

With the University anticipating Fiscal Year 2021 financial losses of $100 to $165 million in the face of the unprecedented financial challenges created by the COVID-19 pandemic, the endowment will play an even greater role in providing support for students, sustaining education and research at Brown, and protecting the health and safety of all employees on campus.

As one of a series of measures to protect the financial health of the University and avoid to the greatest extent possible any layoffs or furloughs of Brown employees, University leaders elected to increase the endowment’s contribution to the operating budget for the coming fiscal year. 

“The Investment Office has done a remarkable job managing Brown’s endowment over the past several years,” wrote Brown President Christina H. Paxson, Provost Richard M. Locke and Executive Vice President for Finance and Administration Barbara Chernow in a Sept. 22 letter to faculty and staff. “In Fiscal Year 2021, we plan to withdraw an additional $15 million to $20 million from the endowment to help cover the gap between expenses and revenues.”

Chernow noted that the endowment is a foundational financial resource for the University, which is committed to ensuring that no student who aspires to attend Brown will encounter cost as a barrier. The endowment continues to fund a significant portion of the University’s financial aid budget each year, enabling Brown to meet the full demonstrated financial need of all undergraduate students.

For members of Brown’s incoming undergraduate Class of 2024 — who will begin studies in January as part of the University’s three-semester academic year during the COVID-19 pandemic — 45 percent of students will receive need-based aid with an average financial aid package of $52,290. In FY 20, nearly 29% of all financial aid dollars awarded to Brown undergraduates were provided directly through the endowment’s contributions.

“Brown’s endowment provides essential financial support for the many scholarly endeavors of our faculty, students and staff, shapes the character of Brown as an institution, and ensures its permanence,” Chernow said. “It has proven an indispensable resource in the volatile financial environment brought about by COVID-19 and will remain instrumental in ensuring our ability to support generations of teachers and learners to come.”

The 12.1% fiscal year return continues a track record of progressive growth in recent years. Annualized returns for Brown’s endowment for three, five, 10 and 20 years are 12.6%, 9.8%, 10.2% and 8.1%, respectively.