College announces record-setting endowment growth
October 1, 2021
This week, the College released its annual endowment report for the 2020-21 fiscal year that ended on June 30, reporting a return of 57.4 percent. The endowment is currently worth $2.72 billion, its highest-ever valuation.
“Historically, the average return to an endowment is in the low teens…to high single digits over the long term,” President of the College Clayton Rose said. “The idea that you can have a return like this is extraordinary—a simply once-in-a-lifetime event. I’ve been involved in the financial markets for the better part of 40 years, and I’ve never seen an event like this.”
The announcement comes weeks after the departure of Paula Volent, Bowdoin’s chief investments officer since 2000. When Volent started at Bowdoin, the endowment was worth $465 million. She leaves it 585 percent larger.
“This work is the work of Paula, her team and the Investment Committee that Paula led,” Rose said. “It’s not just one year—although this year is mind-blowing. Our portfolio, under Paula’s leadership, has for a very long time been at the leading edge of all colleges and universities in this country. And it’s that long-term growth of the endowment that has allowed us to do what we need to do with financial aid and will help to ensure the future of the College for generations.”
Niles Bryant, the College’s current investments manager, assumed Volent’s position on July 1.
Although not all of the College’s peer institutions have reported their final annual endowment returns, this year has been favorable for institutional finance. Consulting firm Cambridge Associates estimated in August that median endowment returns for American colleges and universities “were tracking in the low to mid-30s.”
“Almost every school enjoyed really extraordinary returns,” Rose said. “In terms of [our] peers, we’re going to be at the high end.”
Bowdoin’s growth of 57.4 percent is the most recent in what has been a dizzying string of endowment returns over the past several years. This growth has had immediate impacts—for example, allowing the College to announce a $3.5 million increase to its annual financial aid budget this past spring.
However, Rose emphasized that endowment growth, while notable in the immediate time frame, is most significant when viewed in the long-term. Despite the unprecedented growth in fiscal year 2020-21, the College will likely not deviate significantly from its current level of endowment spending as it sets its next annual budget. Rather, the strongest effects of this recent performance will provide financial security and adequate resources for decades to come, Rose said.
“It’s the future of Bowdoin,” Rose said. “When you’re here with your grandkids showing them around campus, and I’m long gone, and so are all the others … [this is what ensures that] the College remains a great college in the context of those times and that it has the resources to do what it needs to do.”
This year’s exceptional return comes right off the heels of what many predicted would be a catastrophic year for financial markets due to their initial response to COVID-19. However, the result was just the opposite. Due to the way the fiscal year is structured, recording began in July 2020, right at the bottom of the market’s response, and continued through markets rebounding. All things considered, Rose made the point that the endowment is set up to mitigate the long-term effects of a market shock like COVID-19.
“Our portfolio is structured with a long term perspective in mind, not one where you make big decisions to move left or right based on a moment—even a moment as challenging as the one we were confronting in the spring of 2020,” Rose said. “We manage with great investors, and they have the skill, the track record and the relationships to manage through very difficult periods.”
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“When Volent started at Bowdoin, the endowment was worth $465 million. She leaves it 585 percent larger.” is this a CAGR or does it include the addition of donations?