MIT Endowment Decreased by 20 Percent Last Fiscal Year, Ending 7 Years of Growth

MIT’s endowment has suffered during the recession, declining 20.7 percent in value since last year to $8.0 billion from $10.1 billion and ending a seven year period of growth, the MIT Investment Management Company (MITIMCo) recently announced.

The total revenue from investments dropped 17.1 percent during the most recently completed fiscal year, which ended on June 30, 2009. A drop in donations accounts for the rest of the endowment decline.

MITIMCo predicted steep losses for the year in February, when it reported that the endowment had already suffered a 20 to 25 percent decrease, and forecasted then that the endowment could drop by as much as 30 percent. Now with the financial year at a close, MITIMCo credits its better-than-expected performance to its “diversified approach to investment,” and that “investments in the fixed income, marketable alternative, real asset, and real estate arenas helped offset significant declines in public and private equity portfolios.

A quarter of MIT’s General Institute Budget (GIB), which covers most of its operational costs, is funded by the endowment. Another quarter of the GIB comes from tuition.

In a September 16 Letter to the Community, Hockfield thanked the MITIMCo “for their steady, disciplined work,” but also stressed the need for an additional $60 to $70 million in budget cuts over the next two years. Total spending for MIT’s operations was $518 million in the 2009 fiscal year.

The last time MIT’s endowment reported a drop in funds was in 2002 due to nationwide economic distress, when it fell by $1 billion to $5.53 billion. That drop in the endowment was also followed by a series of budget cuts.

With financial reports rolling out at the end of this fiscal year, universities across the nation are also reporting significant endowment losses. Harvard’s investments fell 27.3 percent and donations fell 30 percent, slashing its endowment by $10.9 billion, from $36.9 billion to $26.0 billion. Yale suffered similar losses, with a 30 percent drop in endowment from $22.9 billion to $16 billion.

All five universities with larger endowments than MIT — Harvard, Yale, Stanford, Princeton, and the University of Texas — reported losses.

The MITIMCo’s annual return for the past decade now stands at 9.3 percent, down from 13.2 percent last year.

MITIMCo is responsible for MIT’s investments, operating funds, and retirement plans. A full report on MIT’s finances will be available October 2.