With the launch the Wellesley Effect campaign in October, Wellesley College has been on the receiving end of several large donations, many of which will become a part of the College’s growing endowment. The money raised for the endowment will go towards a multitude of purposes, including helping students fund their education and supporting professor salaries.
“One category in the campaign is for financial aid; that money mostly goes into the endowment. The other part of the campaign that will touch the endowment is the endowment for teaching,” Chief Investment Officer Debby Kuenstner said. “Having a lot of endowed financial aid means that financial aid is partially funded by the endowment and therefore the burden on the operating budget is less. There are some kinds of endowment spending that we think about as budget relieving, such as financial aid and sponsoring of professorships.”
The Wellesley College endowment, valued at $1.9 billion as of June 30, is handled by the Wellesley College Board of Trustees, who are responsible for its investment and spending; most such work is done by the Board’s Investment and Finance Committees.
While the market value of the endowment fluctuates as a result of being invested in capital markets, endowment spending is capped by strict spending rules. Endowment spending is projected to be $82.7 million in the 2016 fiscal year and accounts for 41 percent of the college’s revenues. Wellesley utilizes a hybrid spending rule that is used by about one fifth of institutions with endowments exceeding $1 billion. Annual spending is split into 80 percent being prior year spending adjusted for inflation and the remaining 20 percent being 4.25 percent of the most recent endowment evaluation. This strategy was put in place to mitigate large changes in the endowment that may result from the undulating nature of markets.
To prevent great fluctuations in the amount drawn from the endowment, annual spending is tested against a three year average of past endowment values to be no more than 5 percent and no less than 4 percent of this value, adjusted for inflation.
The endowment is comprised of roughly 3,150 individual endowed funds, which are pooled together in one portfolio of investments. Endowed funds are gifted to the College with the intent of being a permanent support for the school. Most funds in the endowment come with a specific spending purpose, whether to support financial aid or to sponsor a professorship in perpetuity. Gifts can only be used for their given purpose and oftentimes cannot be entirely spent.
“One misconception is that we can just spend the endowment money any way that we want,” commented Kuenstner. “The donor will say, ‘I want to give a scholarship,’ and in some cases it is even more specific. They may say, ‘I want to give a scholarship for a student who comes from Iowa.’ There are a lot of restrictions on how we spend the endowment. If the purpose is not met, then nothing gets spent,” Kuenstner said.
If a gift has been donated with an outdated purpose, its intent can be appealed and the money can be used for a similar, more appropriate measure.
“Suppose someone had given us an endowment for a horse and carriage for the President [of the College] in 1875. We would have to go to the Attorney General of Massachusetts and say, ‘we think that the donor’s intention was to provide transportation for the President of the College and would like to repurpose the gift for presidential transportation.’ Over the years, we have periodically gone through endowed accounts and repurposed gifts,” Kuenstner explained.
Thirty-one percent of the endowment supports financial aid, while 21 percent supports faculty salaries and 18 percent supports departmental programs. Eighty-two percent of the funds from the endowment aid in offsetting budget relief, while the remaining 18 percent of income provides funding for programs that the College does not otherwise support. Such programs include college-to-career efforts, which will now be funded by a recent $50 million joint gift from two anonymous donors.
Andjela Stojkovic ’17 approves of how alumnae donations are used in various ways.
“I think financial aid should be the number one priority for Wellesley as the need-blind admissions policy is a big draw for students. However, I am also glad resources [such as the newly funded college-to-career effort] are being put in place for job hunting and grad school preparation. One allows students to attend the school; another supports students later on in life,” Stojkovic commented. Other students agree with Stojkovic, seeing the endowment as an opportunity to offer an education to a larger cross-section of students.
“I think [the endowment] provides a good chance of bringing in a more diverse student body and serving underprivileged minorities who don’t necessarily have a large representation at a school like Wellesley,” Sara Vannah ’17 said.
Some students like Sarah Carlson ‘17 prefer that even more of the endowment be put towards financial aid.
“I like the idea of using [the endowment] for financial aid because it allows a great cross-section of students. I don’t pay attention to professorship titles; I’d rather a student come here who wouldn’t otherwise be able to,” Carlson said.
Large gifts given to the College are usually not given as a single check but rather in the form of a pledge which comes in over multiple years. Oftentimes, donations of such large magnitude are put towards the endowment and are counted in the projection of how much cash from the campaign is expected to be added to the endowment each year. Donations that come into the endowment do not directly affect the current operating budget but are invested to see greater capital return in the future.
“One thing to realize is that endowment spending is roughly $80 million a year. If campaign gifts came in at $20 million for a given year, what happens is that instead of us sending the College $80 million dollars in cash over the course of the year, we send them $60 million, and they hold onto the $20 million that has been donated. The endowed funds that already existed sell units to raise the $60 million, and the new endowed funds buy $20 million,” Kuenstner explained.
