Date October 18, 2023
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Positive investment return positions Brown endowment to advance support for academic priorities

The endowment provided a record $257 million for student scholarships, scientific research and other priorities in Fiscal Year 2023, while Brown’s investments yielded a 2.7% return.

PROVIDENCE, R.I. [Brown University] — Over recent years, high-performing alternative investments helped to propel Brown University’s endowment to record values. In a Fiscal Year 2023 marked by solid returns in the stock market but more modest returns from alternatives, Brown’s endowment generated a 2.7% investment return over the 12-month period that closed on June 30, 2023.

With $174 million in investment gains, $175 million in new endowed gifts and a $257 million contribution to Brown’s operating budget, the endowment’s total market value increased from $6.5 billion to $6.6 billion.

The 2.7% return for FY23 exceeded the University’s aggregate benchmark, which measures Brown’s performance against index returns that reflect the endowment’s mix of assets, by 0.8 percentage points. The single-year return trailed standard market indices like the S&P 500, as well as benchmarks that measure university endowments more broadly, given that a majority carry simpler asset allocations focused on stocks rather than alternative investments such as private equity and hedge funds.

Longer-term comparisons paint a bright picture for Brown’s performance, with the endowment’s results ranking in the top 5% of all endowment peers over the last three, five and 10-year periods.

Brown 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.

“Growing the value of our investments by half in Fiscal Year 2021 was a transformational event for Brown in enabling the endowment to quickly accelerate its annual funding for important priorities like student scholarships and scientific research,” Dietze said. “Our challenge since has been to sustain those windfall gains, and we’ve done so with a focus on preserving and growing the endowment as a foundational financial resource that will continue to support education and research for generations to come.”

“Fortunately, our investment gains have been sufficient to increase the value of Brown’s endowed funds significantly, and those funds are playing a direct role in bringing world-class student support, teaching initiatives and high-impact research to life on campus every day.”

Jane Dietze Vice President and Chief Investment Officer
Jane Dietze

Brown’s endowment is a collection of charitable gifts designated by donors to be spent for specific purposes and invested by the University. The funds are invested in a diversified portfolio of assets with the intention that each original gift will grow in size and provide an ongoing income stream to support the specific endowed purpose.

Among more than 3,500 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 (31%) designated for scholarships, fellowships and prizes. Among current Brown undergraduates, 47% of students receive need-based financial aid with an average aid package of $63,042, which covers approximately 72% 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 returns over the last two fiscal years follow 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 $4.7 billion in investment returns and provided $1.9 billion to support Brown’s educational mission. Annualized returns for Brown’s endowment for 3, 5, 10 and 20 years are 14.1%, 13.3%, 11.3% and 9.8%, respectively.

That substantial growth in recent years enabled the Brown endowment to contribute an all-time high $257 million to the operating budget in Fiscal Year 2023 (17% of the University’s total budget), despite the challenging environment for alternative investments. With the endowment’s budget contribution smoothed over a 12-quarter basis to account for years when financial markets decline, the contribution marked a 23.5% increase compared to last year and equates to $24,620 per student.

Dietze noted that rather than shift focus annually based on short-term trends, Brown’s Investment Office maintains a consistent approach that calls on a set of essential values to 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.

“Our mandate is to produce investment returns such that each and every endowed gift can continue to make contributions to its stated purpose in perpetuity, and such that contributions do not lose economic value over time to the pressures of inflation,” Dietze said. “Fortunately, our investment gains have been sufficient to increase the value of Brown’s endowed funds significantly, and those funds are playing a direct role in bringing world-class student support, teaching initiatives and high-impact research to life on campus every day.”