Endowment holds steady in FY 2020 despite pandemic

Cornell’s endowment generated a 1.9% return, in line with its benchmark for the fiscal year ending June 30, despite the COVID-19 pandemic’s significant effect on the overall market. Cornell’s FY 2020 return brought the three-year annualized return to 5.9%, compared with a three-year annualized benchmark return of 5.4%.

With long-term investments earning 1.9%, assets at the end of the fiscal year stood at $7.2 billion, slightly down from last year’s record total of $7.3 billion.

“We managed through the crisis while meeting payout requirements and maintaining a long-term orientation,” said Kenneth Miranda, chief investment officer.

Cornell’s overall equity return – including public and private equities – was 7.4%; its core fixed-income return was 9.4%. Private equity investments performed the best, earning a 17.8% return. These gains, however, were offset by losses in enhanced fixed-income investments, which declined by 4.9%, and in the resources portfolio, which was particularly hard hit by the pandemic, with a 14% loss.

“The environment in the first half of the fiscal year was relatively supportive for the key risk markets in which the university makes long-term investments,” Miranda said. “This changed dramatically in the second half, as COVID-19 spread across the globe, exerting an enormous impact on a broad array of industries, asset classes, geographies and markets.

“With a few exceptions, the fiscal year-end returns across markets belied the extreme levels of pricing volatility seen during the year,” he said.

The pandemic also exposed some of the continuing weakness in the many of the illiquid parts of the portfolio, Miranda said. For the past three years, the Office of University Investments has been seeking to reduce these illiquid positions, which remain a significant part of the portfolio.

“Still, our multiyear effort to reposition and restructure the portfolio, and boost endowment liquidity, proved critically important,” he said.

Looking ahead, Miranda said, the office’s long-term initiatives to restructure asset classes and rebalance liquidity, which have been methodical and persistent, will increase its ability to reposition the portfolio. “The years ahead should see substantial further declines in these restrictions,” he said, “and allow the new initiatives to begin outweighing residual issues.”

At the same time, the current 0% interest-rate environment raises fresh challenges, Miranda said. “A strategic review of our portfolio mix will be a priority,” he said.

This year, the office also hired new staff, expanding its investment team.

“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.”

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Rebecca Valli