MIT’s investments return at 55 percent, highest in more than 20 years
MIT to increase endowment payout by 30 percent starting July 2022
MIT announced an unusually strong endowment performance for the fiscal year ending June 30, 2021 on Oct. 14. President L. Rafael Reif wrote in a letter to the MIT community that the Institute’s return on pooled investments achieved a 55.5% return, “its strongest annual performance in more than 20 years,” on the same day.
MIT’s endowment rose by 49.0% and $9 billion, to $27.4 billion in 2021 from $18.4 billion in 2020. Endowment makes up the largest portion of MIT’s total investments.
MIT also released the fiscal year’s Report of the Treasurer. Executive Vice President and Treasurer Glen Shor wrote in the report that MIT closed the year with net results of $216.4 million.
MIT’s endowment is “intended to support current and future generations of MIT scholars.” It is used for activities such as “education, research, campus renewal, faculty work, and student financial aid,” according to MIT News.
The investment pool with the endowment provided $851 million, or about 30 % of MIT’s operating revenues, for the last fiscal year, Reif wrote. This covered “everything from utilities, to support for teaching and learning, to the sudden need for a community-wide Covid testing system.”
Endowments consist of “gifts from alumni and friends” who expect that “funds will be invested in ways that enable ongoing benefits over many years.” MIT’s endowment consists of approximately 4,400 individual funds. The endowment is managed by the MIT Investment Management Company (MITIMCo), a division of MIT.
Endowments can thus be either donor-restricted or not, meaning they are often “permanently designated by the donor for a specific purpose,” Reif wrote. This could potentially limit “spending priorities for the new funds.” Salaries and wages, departments and research, and undergraduate areas lead the largest composition of endowments with donor restrictions.
Reif wrote in the letter that the rise in endowment enables MIT to “put these gains to use more quickly” while “maintaining appropriate balances to meet future needs.”
Due to this year’s exceptional returns, Reif announced that MIT will increase endowment payout by 30% for fiscal year 2023. Traditionally, MIT was only able to “increase endowment support for campus operations” by around “4.5 percent each year.”
Reif also announced that “campus-based, benefits-eligible staff and faculty” will receive a “special 3 percent base pay increase,” effective Dec. 1. All “RAs, TAs, graduate students with fellowship appointments, and postdocs” will also receive a three percent stipend increase.
Reif wrote to MIT News that “new funds will be deployed in ways that benefit students at all levels, and make the Institute more capable of advancing the cutting-edge research and science the world needs.” Task Force 2021 and Beyond is tasked with identifying such key priorities.
Shor echoed Reif in the treasurer's report, writing that “foremost” among the “priorities” is to “deploy MIT’s expertise to unlock breakthrough solutions to climate change.” This includes the Institute’s Fast Forward: MIT’s Climate Action Plan for the Decade plan to “achieve the goal of decarbonizing the global economy by 2050.”
Shor noted in the treasurer’s report that despite “immense challenges of operating in the COVID-19 pandemic environment,” the Institute “continued to demonstrate strong financial performance.”
MIT “implemented targeted cost controls” in the beginning of fiscal 2021, “anticipating pressures on its finances from the need to adapt to COVID-19.” Pressures included restraints from a “reduced on-campus presence and pandemic-induced restrictions,” leading to “loss of student-related revenue” and “one-time subsidy to faculty and staff to assist with heightened childcare needs.”
MIT reported the largest increase in returns at 55.5% compared to peer institutions, such as Harvard University at 33.6% and Yale University at 40.2%.