Wellesley College’s endowment grew to $2.982 billion after the Investment Office posted a 7.8% return on its investments in fiscal year 2024. 

With last year’s 4.2 percent increase in investment return, the endowment returns to steady, positive growth after a 9.6% decline in 2022.

The endowment is broken down into five main asset classes: public equity, long term alternatives, semi marketable, fixed income and cash.

Public equity investment is the asset class that brought the largest return, growing by 18.2%. This comes as the broader stock market, namely the S&P 500 index, performed well, delivering over double-digit growth year-to-date. 

The endowment also saw positive net distributions in venture, growth equity and natural resources, according to Deborah F. Kuenstner, Chief Investment Officer. 

The College gained by selling previous oil and gas investments made back in 2017 before the Board decided to “prohibit new investments in fossil fuel funds”..Venture capital, which refers to providing startups with capital to bet on their longer-term growth, is one of the strong arms of the endowment. Long before the official establishment of the Investment Office, the Board of Trustees invested in the venture capital ecosystem, and now Wellesley has a “venture portfolio with top name venture capitalists,” said Kuenster. 

As the Investment Office looks for long-term picks, Kuenstner said they are optimistic about technology sectors, whether it’s AI-related development in cybersecurity, data management and data storage, or scientific breakthrough in biotechnology. 

The endowment does not currently have private credit, a 1.7 trillion market of loans provided by non-bank lenders. It also does not hold any other forms of currencies other than US dollars, even as the investing world rushes to double down on private credit and explore cryptocurrencies. 

No liquidity crunch

Wellesley’s private equity investment surpassed $1 billion in market value since 2021, according to the College’s annual reports published in the last three years. 

The surge in the College’s private equity investment comes as the wider industry grows significantly thanks to cheap cash in a near-zero interest rates environment. 

Since the Federal Reserve started hiking interest rates, private equity firms have struggled to strike deals and return cash to their investors who were eager to cash out their previous bets.

While the returns fall short of expectations in a normal private market environment, the College does not have “a liquidity crunch,”  a shortage in easily accessible assets to pay back debts, compared to peer institutions.

“Our private portfolio is quite mature,” said Kuenstner. “We have funds that are of older vintage where the assets are pretty mature. In some cases in venture funds, the positions had already been converted to public equities and there was room for distribution.”

In other words, the College has made “mature commitments” where the portfolio could include later-stage companies that allow the College to profit when those companies go public. 

Funding the renovation

The endowment supports the College’s operation. This year, it provides approximately 43% of operating revenue. 

In recent years, Wellesley has started a handful of construction projects across campus to renew older buildings and systems. From Clapp Library to the overhaul of residential halls, the College funded these critical repairs with debts, fundraising and the endowment fund. 

In April 2022, the Board also approved a special draw from the endowment to make critical repairs to buildings including Pendleton East, the Stone Center and the Davis Museum.

One of the priorities was to make sure the College can finance such projects while supporting usual operations. 

“In addition to generating the regular draw, which is around $100 and $125 million, we have to also generate a big part of the special project,” said Kuenster.

Overall, the endowment strategy is meant to support long-term financial strength of the College.
“This is a portfolio set up to produce results over the long run. It is not set up to be tactical,” said Kuenster.

Contact the editors responsible for this story: Sazma Sarwar and Lyanne Wang