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MIT Gets 50 Percent Return on Endowment

By Matthew Palmer


Returns of over 50 percent on MIT’s investments this past year and the continued efforts of the capital campaign have raised the Institute’s total endowment to over $6 billion.

In the fiscal year ending June 30, the Institute saw an average return of 57.7 percent on its investments from the endowment, Treasurer Allen S. Bufferd said. That brought the general endowment total to $6.5 billion.

Some other universities have also seen good returns. In the year ending June 30, Harvard University earned a 32 percent profit, adding $4.6 billion to their endowment, The New York Times reported. Duke University and the University of Notre Dame saw 59 and 58 percent returns, respectively.

“Like a number of institutions, MIT had a large venture capital investment,” Bufferd said. The continued success of these investments and of the stock market have played a role in fueling large returns.

MIT’s endowment has grown $2.2 billion since 1999. In 1994, it totaled $1.45 billion, according to the capital campaign web site.

Capital campaign nears goal

While returns on the endowment increase, so does the number of the donations. William Hecht SM ’76, Executive Vice President of the Alumni/ae Association, attributes some of the gains to “a couple of very large gifts.”

The ongoing capital campaign has raised over $1 billion in donations since its launch in November, 1999. MIT hopes to raise another $500 million before the campaign officially ends in June, 2004.

Donations come in two varieties: expendable and for an endowment. Expendable gifts can be used for a specific purpose designated by the donor a short time after they are given.

The endowment is a permanent fund that is broken up into many separate pools. When a donor gives money, he can specify what cause will benefit from it.

This means that while each fund will benefit the MIT community separately, the Institute cannot change the proportions of the funds, Bufferd said.

A portion of the endowment is reinvested and will earn a certain rate of return. This means a gift that is “modest in the beginning would have the same purchasing power [in the future], maybe even more,” Hecht said.

Whether the recent successes will fuel more donations from alumni is uncertain, Hecht said. “Some people say ‘Why give?’ while others want to be part of a winning team,” he said.

Strong economy fuels big returns

MIT uses several financial companies and a variety of investment types to grow its endowment.

Like any financial investment, though, a slump in the economy or the stock market would hurt MIT’s investments. However, Bufferd says he is “fundamentally optimistic about the investment opportunities on a global basis.”

Bufferd does not anticipate significant changes in the approach MIT takes to investing. “We’ll stay the course for a while,” he said.

“The Institute, as a matter of policy, rolls out positive or negative impact on a three-year cycle,” Bufferd said. This means a third of this year’s assets will be considered when looking at each of the next three years.