A closer look at Colby’s endowment
$886,000,000. This is the total size of Colby’s endowment as of 2019. Yes, it’s a very large number, but what does it really mean?
To truly understand Colby’s endowment, one must first understand what a college or university endowment is and what purpose it serves. According to the American Council on Education, an endowment is “an aggregation of assets invested by a college or university to support its educational mission in perpetuity.” Some, but not all, of these assets are donated. So, to summarize: a college’s endowment is an investment fund, usually composed of several different types of assets, many of which are donated, which serves as the financial backbone of the College.
Schools can use their endowments for several things, yet the most common uses include funding research, public service, teaching, and financial aid opportunities. These uses depend on the specific endowment’s legal structure, usually determined by the donors who made the charitable donation to the institution (i.e., what someone donated the asset for, specifically).
Compared to the other NESCAC colleges and universities, Colby has a below-average endowment, ranking 8th out of the 11 NESCAC schools. The average endowment size among this group comes out to roughly $1.175 billion, using data from 2017. Williams ranks first, while Connecticut College places last with an endowment less than one-ninth of Williams’s. Although Colby’s endowment is not monumental when compared to its NESCAC rivals, $886 million is no small number. That is enough money to buy the Los Angeles Kings, yet it is quite doubtful that the Colby board of trustees would approve such an investment.
Colby releases an endowment report at the end of every fiscal year, the most recent coming at the end of the 2019 Fiscal Year (FY2019). This report does not detail what the fund was used for over the past 12 months, other than the total amount spent, which came to roughly $46 million in 2019. However, the report does provide a great amount of insight into what the endowment is composed of in terms of asset class distribution.
The FY2019 report defines four different asset classes that comprise the endowment: marketable equities, non-marketable equities, hedge funds, and cash and bonds. These distributions make up 35.7%, 30.5%, 22.7%, and 11.1% of the endowment respectively.
According to the 2019 report, marketable equities consists of several subcategories: domestic, international developed, emerging markets, marketable real estate, and marketable natural resources. Non-marketable equities also have subcategories, including venture capital, private equity, real estate, and natural resources. Hedge funds have no subcategories, as does the final class, cash and bonds. All of these categories and subcategories are denoted in the endowment report, yet no detail is provided regarding what makes up each of them specifically.
The area of the report that goes into the most detail is the appendix, which lists all direct security holdings, or stocks held by Colby’s endowment. This list is included due to the College’s responsible investing policy, which was established in 2006, per the FY2019 report. The list contains the names of 31 companies, all publicly listed, whose stock is owned by Colby through its endowment fund. Some of the most notable companies whose stock is held by the College include Amazon, Slack Technologies, Alibaba Group, Visa, Netflix, Adobe, Salesforce, Facebook, Alphabet (Google), and Starbucks.
Many of these stocks have performed very well since the stock market fell in February and March, yet no data has been released regarding the endowment’s performance in 2020. This will certainly be a difficult year financially for many colleges and universities around the world. Yet, the Colby community will have to wait until the next endowment report to see just how impacted the College has been due to the economic uncertainty caused by the COVID-19 pandemic. The endowment increased $42 million in FY2019; however, it seems unlikely that this impressive return will be replicated in FY20.
~ Sam Leathe `21
