Endowment at $10 bil

MIT’s percent returns outperform peers’

CORRECTION TO THIS ARTICLE: A previous version of this interactive incorrectly showed Stanford's 2012 endowment at $19.7 billion with a 19% increase in FY 2012. It is actually $17.0 billion, having increased by 3%. This has been corrected throughout the relevant parts of the article. The previous version of this article furthermore stated that "just over half" of MIT's 2012 operating revenues came from research grants. For clarification, MIT's operating revenues as listed in the Report of the Treasurer include revenues that support Lincoln Laboratory and the MIT-Singapore Alliance for Research and Technology.

In the past few months, several of the richest universities in the U.S. have announced their endowment performances for the 12 months ending on June 30. MIT’s endowment grew to $10.1 billion, the highest value achieved in its history. MIT’s primary investment pool, produced a return of 8 percent, topping returns at other schools, including Harvard, Yale, Princeton, and Stanford, the four private universities with deeper pockets than MIT.

However, all of these schools reported poorer returns on investments in fiscal year (FY) 2012 than in the previous year. MIT posted a 17.9 percent return in FY 2011.

Increases in university endowments reflect gains from investments as well as contributions from donors, which accounted for 14.3 percent of the increase in MIT’s endowment in FY 2012. These increases are offset by spending towards each university’s operations. The portion of the endowment transferred to the operating budget is typically about 5 percent.

Harvard’s investments produced a return of -0.05 percent which, after contributions and spending appropriations, resulted in Harvard’s endowment dropping from $31.7 billion to $30.7 billion, down from the school’s 2008 peak of $36.6 billion.

However, Harvard’s endowment is still the largest among universities, with Yale’s $19.3 billion at a distant second. Yale’s endowment fell slightly in FY 2012 due to spending despite a 4.7 percent return.

Stanford only had an investment return of 1 percent for the year, but donations boosted their endowment to $17.0 billion, up half a billion from 2011.

The endowments of Harvard, Yale, and Stanford remain below pre-recession values and await a full recovery from the economic crisis. Jane Mendillo, president and CEO of the Harvard Management Company, attributed 2012’s performances to “unresolved macroeconomic headwinds” in the Harvard Gazette.

MIT’s Report of the Treasurer was released last month. Executive Vice President and Treasurer Israel Ruiz SM ’01 has declined to make further remarks on MIT’s 2012 performance. The MIT Investment Management Company did not respond to The Tech’s requests for comment.

The varying performances among universities are due in part to the disappointing performance of emerging markets in 2012. The SPDR S&P Emerging Markets index fell 15 percent during FY 2012, while the S&P 500, a benchmark for investments in domestic equities, returned 5.5 percent.

The Harvard Management Company invested roughly equal amounts in emerging markets, developed foreign markets, and U.S. markets in 2012, according to a September report from Mendillo. MITIMCo invests more than three times as much in developed and domestic markets than in emerging markets.

The 4.6 percent of MIT’s endowment allocated for spending in FY 2012 made up 15.7 percent of the $3.0 billion collected in operating revenues, assets from which funds are pulled to run MIT. The lion’s share of these assets comes from research grants, which comprised just over half of FY 2012 operating revenues and totaled to more than five times MIT’s income from tuition. (Of the research money, 57.2 percent came from support for Lincoln Laboratory and the Singapore-MIT Alliance for Research and Technology.)

Gains from a pool of investments distinct from the endowment investments also contribute to the cash flow into the operating budget. The FY 2012 returns from these investments were worse than those from the primary endowment investment pool. All together, MIT’s investments grew 5 percent in FY 2012.

CJames almost 11 years ago

Stanford's endowment is $17.0 billion -- not $19.7 billion. The latter is the figure for the "Merged Pool" of investments, which includes not only the endowment but also capital reserves for Stanford Hospital.

Leon Lin almost 11 years ago

CJames, thank you for bringing this to our attention. A correction will appear on this page and in the next issue of The Tech.