Cornell University: Endowment largely preserves gains during difficult FY 2022

In a challenging year for markets buffeted by the war in Ukraine, supply chain concerns, rising inflation and tightening U.S. monetary policy, Cornell’s endowment sustained a modest loss during the fiscal year ending June 30, but largely preserved gains from a historically high return the previous year.

The 1.3% investment loss – following last year’s 41.9% gain – significantly outperformed the investments’ strategic benchmark return of minus 5.1%, ending the fiscal year valued at $9.8 billion, according to the Office of University Investments.

“We ended the year with a very respectable return relative to the environment,” said Chief Investment Officer Kenneth Miranda. “We position the portfolio for the long term to weather positive and negative years. Fundamental to our investment philosophy is an understanding that over our near-infinite time horizon, the endowment will confront all manner of expected and unexpected market conditions.”

Cornell’s endowment consists of more than 8,000 individual accounts, the vast majority of which are restricted by donors for specific uses. The permanently invested capital is intended to be self-sustaining in perpetuity. Each year, the endowment distributes roughly 5% of earnings to support the university’s operating budget, helping to fund priorities including financial aid and other student support, research, faculty salaries and stipends, facilities and other programs.

In FY 2022, the endowment paid out $352 million, equivalent to nearly 7% of the university’s operating revenues.

Miranda attributed Cornell’s solid performance in a challenging year to his office’s work since FY 2016 – the last year with a negative return – to diversify the university’s investment portfolio and strategies, reduce fees and enhance liquidity and flexibility.

“These results reflect an ongoing effort to improve approaches and processes, including deeper diversification of the portfolio,” he said.

That work continues, Miranda said, including an initiative to improve consistency between public and private positions with respect to sectors, geography, risk and other criteria. He’s optimistic about the investment team, processes and systems now in place, but expects highly challenging market conditions to persist over the next 18 to 24 months.

“The likelihood of an extended period of lower returns and geopolitical turmoil appears heightened,” Miranda said. “The broad diversification of the endowment is intended to provide resilience and support for the wide range of possible outcomes.”