Although the Cornell endowment seems to stay in the news as groups such as the “Make Cornell Pay” Coalition demand spending endowment funds on their pet projects, Cornell’s Investment team reports every calendar quarter on the endowment’s progress.
These reports coincide with meetings of the Cornell Trustee Investment Committee that is ultimately responsible for investment strategy and results.
What is “Cornell’s Endowment?”
Its official name is the “Long-term Investment Pool.” It consists of separate donations to benefit Cornell as well as donor’s retirement savings with Cornell getting what remains when the donor dies. When Cornell receives a donation for construction that will not occur until a future date, Cornell sometimes invests the money in the pool as a “quasi-endowment”. Besides these exceptions, the money is invested with safeguards that will protect the purchasing power of the fund forever.
Cornell’s $9.2 billion endowment operates like a mutual fund. Over 8,000 donors have pooled their money into a common set of investments, with a number of shares assigned to each account. Each month, Cornell divides the current value of those investments by the number of shares to calculate a new share price. When a new donation arrives, the gift’s value is divided by the share price to determine how many shares of the endowment is owned by that account.
Endowment accounts grouped by purpose (p. 48)
Each year, the Trustees declare the amount to be paid out per share, based on a seven year average of the endowment’s earnings and growth. For 2023-24, it pays $2.65 per share, or $0.22 per share per month. Any growth beyond that payout is reinvested to protect against future inflation. In sum, just as the stock market can go up or down, the share price of the Cornell endowment goes up or down as well.
Latest Results
Cornell announced that its endowment achieved a 3.6% return in the fiscal year ending June 30, 2023, adding a net investment gain of $355 million to finish the year valued at $9,357,061,164. Over the last five years, the endowment returned an annualized 9.3%, exceeding its benchmark by 1.9% per year. The 2022-23 gain followed a 1.3% loss in 2021-22 and a historically high 41.9% gain in 2020-21. However, since the June 30 share price of $71.34, the value of Cornell’s investments has declined, and the endowment’s September 30 share price was $70.375.
In 2022-23, the endowment paid out $386 million – equivalent to about 7.1% of the university’s operating revenue – toward the purposes specified by each account’s donors.
In general, investment performance has improved since Cornell’s investment team relocated from Ithaca to New York City. Chief Investment Officer Kenneth Miranda said, “Our long-term orientation, sophisticated asset allocation and overall structure of the portfolio continue to build a successful long-term structure capable of withstanding unexpected changes in market conditions.”
RELATED: The Oath of Loyalty
Taxation
Historically, non-profit charities do not pay federal income or capital gain taxes, However, in 2017, a federal endowment tax was enacted in the Tax Cuts and Jobs Act of 2017 in the form of an excise tax of 1.4% on institutions that have at least 500 tuition-paying students and net assets of at least $500,000 per student. Because Cornell has an endowment per student of only $284,715.92 – the lowest in the Ivy League – it is not subject to this tax.
On November 1, Donald Trump proposed to establish an American Academy to deliver tuition-free college degrees by taxing the large endowments of existing universities. It is not clear whether his proposal would reach Cornell’s endowment.
Cornell’s investments earn modest gains. However, Cornell’s endowment is not as large as other Ivy League schools, and all of its payouts are already dedicated to the purposes specified when each gift was made.
