PROVIDENCE, R.I. [Brown University] — Buoyed by strong performance among financial markets across the globe, the Brown University endowment generated a 51.5% return during Fiscal Year 2021. Brown closed its fiscal year on June 30, 2021, with an endowment market value of $6.9 billion.
Brown’s endowment is a collection of charitable gifts designated by donors to be spent for specific purposes and invested by the University. Investment returns support priorities including scholarships for students from low-income families and high-impact scientific research. Over the course of the fiscal year, Brown’s endowment contributed $194 million to the University’s operating budget, which represents 15% of the total.
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 from college; 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. As just a few examples among thousands:
- An endowed fund is enabling full scholarships for U.S. military veterans who attend Brown, supporting a plan to double the number of student veterans enrolled as undergraduates by 2024.
- Another is fueling annual financial support from Brown to Providence Public School District, providing critical investments in programs aimed at strengthening teaching and learning in local K-12 classrooms.
- A new fund is launching the Center for Alzheimer’s Disease Research, which brings together biomedical scientists with world-class physicians to work toward early detection and treatment of the disease.
- And a fourth is ensuring permanent implementation of The Brown Promise, an initiative that replaced loans with scholarships in all University-packaged undergraduate financial aid awards beginning in 2018-19.
Provost Richard M. Locke, who chairs the committee that develops Brown’s annual operating budget, said that each of the endowment’s designated funds is instrumental in supporting individual students, research, service to the community or the residential educational experience at Brown. Collectively, they ensure that students from every socioeconomic background can access a Brown education, and support critical scholarly endeavors of students, faculty and staff.
“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,” Locke said. “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.”
The endowment also provides funding support for major University initiatives, such as Brown’s plans to contribute $125 million toward forming an integrated academic health system for Rhode Island with the Lifespan and Care New England health systems.
Locke added that the success of the endowment is particularly important as Brown seeks to close a persistent structural deficit in the University’s budget. That deficit has been challenged further by the negative financial impact of COVID-19, which has both reduced University revenues and required new investments to protect the health and safety of the Brown community. With pandemic-related expenses exceeding $55 million — for priorities such as COVID-19 testing, personal protective equipment and emergency funds to allow students to study remotely — and revenue declines of more than $30 million due to cancellation of some programs, Brown closed Fiscal Year 2021 with a $52.2 million deficit in its operating budget.
Because the endowment’s contribution to the operating budget is based on the endowment’s average market value over the previous three years, Locke said the $194 million contribution for Fiscal Year 2021 is expected to steadily increase in each of the coming years. The annual payout rate ranges from 4.5% to 5.5% of the average market value.
“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.
Balanced performance across asset classes
By any standard, Fiscal Year 2021 marked an extraordinary single-year return for the Brown endowment. The 51.5% return surpassed both the preliminary return of its benchmark portfolio (43.1%) and Cambridge Associates’ preliminary mean (35.6%) and median (34%) returns for colleges and universities.
Vice President and Chief Investment Officer Jane Dietze said that rising financial markets played a significant role in Brown’s return, supporting results for many higher education endowments across the country.
Fiscal Year 2021 coincided with strong appreciation in financial assets as measured by broad market indices, with the S&P 500 index, for example, gaining 40.8% during the period. The initial disruptive reaction of financial markets to the shock of the COVID-19 pandemic fell largely in the prior fiscal year, and markets were already recovering by July 1, 2020, helped by substantial fiscal and monetary stimulus programs.
Dietze noted that even with the exceptional annual return, 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 our external partners as well as the dedicated members of the Investment Committee and our Investment Office at Brown for making this a remarkable year,” Dietze said. “Even so, stewardship of the Brown endowment should not be evaluated on any single-year return — instead, our success should be measured entirely through long-term growth of the endowment’s role as an enduring financial resource, providing support for students, and advancing Brown’s mission of research and teaching.”
Dietze said Brown’s portfolio of investments can be broadly grouped into three large classes (Public Equity, Private Equity and Absolute Return). Each generated a significant contribution during the fiscal year, resulting in a balanced overall performance. Public Equity strategies represent 19.8% of Brown’s endowment and generated a 58.9% return. Representing 39% of the endowment, Private Equity generated an 86.8% return. Absolute Return accounts for 24.8% of the endowment and generated a 15.3% return. Two smaller asset categories, Real Assets and Fixed Income, also contributed positive returns.
The appreciation of 51.5% generated investment returns of $2.4 billion during Fiscal Year 2021. After adding gifts to the endowment — and net of investment returns, expenses and the $194 million operating budget contribution — the endowment market value increased from $4.7 billion to $6.9 billion over the fiscal year.
With Brown’s investment program predicated on executing a repeatable investment process rooted in prudent risk management, the University’s overall fiscal year return continues a track record of progressive growth over the long term. Average annualized returns for Brown’s endowment for three, five, 10 and 20 years are 24.1%, 19.6%, 12.9% and 10.3%, respectively.
Over the last decade, the endowment has produced $5.1 billion in investment gains and provided $1.6 billion to support Brown’s educational mission.
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, 44% of students receive need-based financial aid with an average aid package of $54,327, which covers approximately 70% of the full cost of attendance.