Cornell’s endowment increased from $6.9 to $7.3 billion in fiscal year 2019 to deliver a 5.3 percent return, marking a sharp decline from the 10.6 percent return of fiscal year 2018.
Although Kenneth Miranda, Cornell’s Chief Investment Officer, called the fiscal year’s performance “a solid result” in a press release, records show that Cornell’s endowment return trailed that of every Ivy League school except for Columbia and the University of Pennsylvania, which has yet to release results.
Brown University led the pack with a 12.4 percent return, while Yale narrowly edged out Cornell with a performance of 5.7 percent.
The result also only narrowly bested the S&P 500’s 4.9 percent returns over the fiscal year ending in June, a metric that indicates the overall direction of financial markets and commonly is used as a benchmark for investment performance.
Cornell’s current endowment is comprised of a diversified portfolio that currently includes stakes in public equities and bonds, along with alternative investments, such as real estate and private equity — which, according to Miranda, provided a much-needed boost to returns.
Over the past year, the University’s real estate portfolio outperformed its 6.5 percent benchmark to deliver year-over-year returns of 10.9 percent, while its private equity commitments yielded a strong 18.2 percent.
Despite largely failing to keep pace with its peers, Miranda said that it was “a noteworthy achievement” that the endowment matched its strategic benchmark — a number by which investment funds will evaluate their relative performance throughout the year.
“We’re seeing a lot of very promising indicators across asset classes as we work to get our portfolio positioned correctly,” Miranda said.
The management of Cornell’s investments has seen significant changes since 2016, when Miranda, who previously served as the International Monetary Fund’s Chief Investment Officer, took charge of the endowment after the fund experienced a long period marred by turmoil and turnover.
From 2005 to Miranda’s current tenure, Cornell’s endowment cycled through six investment chiefs amidst a time of noticeable investment underperformance, according to a profile published by Institutional Investor. Over that 10-year period, the University delivered annualized returns of 4.8 percent compared to an average of 6 percent for all endowments with over $1 billion in assets; had Cornell matched average returns, it would have made an additional $700 million over that timespan.
“The worst day was going into an investment committee meeting where two people were yelling at one another over whether or not we should be hedging our equity exposure — because of the prior day’s market activity,” Don Opatry, the current chairman of Cornell’s investment committee, told the publication on the endowment’s previous managerial difficulties.
As part of the reforms spearheaded by Miranda since his appointment, the endowment relocated its offices from Ithaca to New York City in a bid to attract more financial talent, and has begun to restructure its portfolio by cashing out of legacy investments — though such efforts have been constrained by the illiquid nature of those assets, Miranda said.
But according to Joanne DeStefano, Cornell’s Chief Financial Officer, the University’s mixed investment track record as it undergoes strategic changes may pose less of a concern than it would for other peer universities. In 2018, only 8 percent of the University’s revenue came from funds distributed from its endowment, while at Harvard, that figure was 35 percent.
“Operating costs at Cornell are less dependent on endowment payout than at other highly endowed institutions,” DeStefano wrote in Cornell’s most recently published annual financial statement report, attributing it to the University’s strong “revenue diversity.”
In addition to tuition, which comprised 17 percent of Cornell’s operating revenues last year, a plurality of its funds, at 26 percent, came from Cornell’s Medical Physician Organization, which operates through Weill Cornell, while 16 percent of its revenue was generated by grants and contracts. Cornell’s remaining revenue came from government aid, non-credit-awarding educational programs, auxiliary enterprises, such as dining and housing, and contributions.