When the coronavirus prompted nationwide shutdowns in March, the stock market plummeted by over 13 percent in just one day. Fueled by concerns America’s economy would enter a depression, experts widely expected that investment funds, such as Cornell’s multi-billion-dollar endowment, could take a major hit.
Those concerns, however, largely did not materialize — with a dramatic, months-long rebound in equities helping to push Cornell’s annual results into the black. From July 2019 to the end of June, the endowment posted a 1.9 percent annual return, according to a University press release.
While the endowment’s investments generated a positive return, its total assets fell from $7.3 billion last year to $7.2 billion, likely owing to money distributed to help fund the University’s operations.
According to Cornell’s Chief Investment Officer, Kenneth Miranda, the performance mostly met expectations, allowing the University to manage “the crisis while meeting payout requirements and maintaining a long-term orientation.”
But although the pandemic has led to historic job losses and permanent business closures, most markets have proved to be unexpectedly resilient. The S&P 500 and Nasdaq both reached all-time highs in the last few months, while low interest rates have propelled the housing market to unprecedented heights.
All told, as Miranda put, “the fiscal year-end returns across markets belied the extreme levels of pricing volatility seen during the year.”
Even so, while Cornell’s just-positive results beat early spring’s most dire projections, they trail those of the entire Ivy League, except for Princeton University, which has not yet reported its performance.
Beyond its seven rivals, dozens of its peers proved much more successful in taking advantage of the financial turnaround. For them, the unpredictable coronavirus economy decisively proved to be more blessing than curse.
Harvard University posted a 7.3 percent return, beating its previous year’s performance. Columbia’s endowment returned 5.5 percent to total $11.2 billion, and Dartmouth’s returned 7.6 percent to total $6 billion. Yale’s returned 6.8 percent for the fiscal year, ending with $31.2 billion in assets.
In fact, data compiled by trade publication Pensions and Investments reveals that — of 26 major endowments that have so far reported 2020 results — Cornell’s annual return was worse than all but six.
The results represent another year of middling returns for the University, whose investment performance has, in the past, often lagged behind peers.
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 amid 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.
In one of the biggest changes spearheaded by Miranda since his appointment, the CIO set forth a “multiyear effort to reposition and restructure the portfolio,” primarily by gradually unwinding positions in illiquid investments.
According to Miranda, underperformance in those legacy investments has left some “residual issues,” partially explaining the endowment’s comparatively low return this year. While the fund’s public and private equity investments returned 7.4 percent, and the “core fixed-income” portfolio yielded 9.4 percent, these gains were counteracted by marked losses in other asset classes. For instance, the endowment’s resources portfolio — which the press release said was “hard hit by the pandemic” — posted a 14 percent loss.
Nevertheless, Miranda expressed optimism that brighter days are ahead for Cornell’s endowment, which has hired new staff in the past year.
“Making further progress at an accelerating pace is the main priority for the year ahead,” Miranda said. “This will position the endowment to support Cornell for the long run.”