Through the 1960s Cornell’s endowment was invested in bonds, and as a result, Cornell’s endowment earnings (and all other universities’) matched the bond rates. As Cornell later shifted its investments into stocks and hedge funds, there was greater competition between Ivy League schools to produce the highest return on their investments.
A good endowment earnings track record could encourage some donors to make gifts to Cornell rather than to other causes.
Cornell appeared to be at a disadvantage because its fund managers were based in Ithaca, and top financial talent preferred to live in the New York City area. Hence, in 2016-2019, Cornell relocated its investment office to Manhattan. Higher investment returns under Chief Investment Officer Kenneth Miranda flowed following a reorganization of both the staff and the investment strategy. This resulted in an all-time peak return of 41.9% in 2020-21.
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What is the Cornell Endowment?
The Cornell endowment, which was worth $10,195,716,353 on Sept. 30, largely represents gifts to Cornell that were given with the expectation of lasting forever with only income from the gift being spent. Over 8,000 donors have given such gifts, earmarked for specific purposes such as financial aid, professor salaries or building maintenance. Sometimes, when a gift must wait to be spent in the future, the money is temporarily invested in the endowment.
The endowment operates like a mutual fund, with share prices shifting each month. When a gift is added to the endowment, the size of the gift is divided by the current share price and the gift becomes a fixed number of endowment shares. Each year, the Board of Trustees declares a monthly payout per share based upon a seven-year average of past endowment earnings.
In 2023-24, the endowment earned $860 million in net investment gains, but paid out $411 million toward the purposes specified by each endowment gift. The difference is reinvested into the endowment to compensate for future inflation or drops in earnings. In 2023-24, the annual endowment payout represents 7% of Cornell’s overall income.
When the Trustees approved the 2024-25 budget, they set the payout at $2.75 per endowment share, up from $2.65 last year.
Comparison to the Other Ivies
“Over the past year”, Miranda said, “the university’s investments contended with challenges from inflation, technological change, economic uncertainty and ongoing geopolitical tensions. Publicly traded assets generated strong returns, reflecting robust economic growth, positive sentiment around falling inflation and expectations of interest rate cuts by the Federal Reserve.”
Yet, Cornell’s peer institutions, the Ivy League plus MIT and Stanford, faced the same challenges. Cornell finished in the middle of the pack:
However, Congress has passed a 1.4% excise tax on endowment earnings for universities that have an endowment per student of $500,000 or more. Because of Cornell’s large student body, it does not pay that tax, giving it an advantage over Harvard.
On a per-student basis, Cornell’s endowment remains smaller than many peer institutions’, ranking 71st in size among U.S. and Canadian colleges and universities surveyed in the 2023 NACUBO-TIAA Study of Endowments.
Divestment
Protesters on campus have demanded that Cornell refrain from investing in particular industries or companies that do business with Israel or weapons manufacturers generally. Opponents of such targeted investments argue that any investment policy that diverges from the goal of maximizing earnings will harm overall results. Because the Investment Office contracts with outside fund managers to handle different portions of Cornell’s investments as a part of larger investment pools, Cornell at any given time does not know exactly how its endowment is invested, or which companies have been hedged with stock options or other instruments.
“The Office of University Investments will continue to seek to preserve and grow the real value of the endowment to support the university’s mission,” Miranda said. “Our diversified portfolio, experienced investment team and rigorous processes position the endowment well to achieve these goals.”
