Fiscal Year 2021
Brown University Financial Report

Financial Report

Financial Statement Overview

Letter from the Chief Financial Officer

Brown University closed Fiscal Year 2021 in strong financial health, despite the continuing challenges presented by the COVID-19 pandemic, and due in large part to the mitigation efforts put in place over the past year. We are grateful to our community for their shared commitment and resilience. This incredible community of students, faculty and staff is the driving force allowing Brown to continue moving forward despite the challenges we have collectively faced since the onset of the global public health crisis.

As Brown entered its first full year of operations during this worldwide pandemic, the University took quick action to support its students, faculty and staff. While many students elected to take leave in Fall 2020, nearly the entire course catalog was converted online to provide students with the option of continuing their studies remotely. At the same time, Brown elected to modify its academic calendar to a three-term schedule, giving every student the option of having two residential semesters in Rhode Island. To accomplish this, Brown leased hundreds of hotel rooms and apartments throughout Providence to enable students to safely attend in person, while living in single-occupancy units to significantly reduce the likelihood of COVID-19 transmission. Steps to ensure the safety of our community also included a robust weekly asymptomatic testing program for all students, faculty and staff members who came to campus. In total these new pandemic-related expenses exceeded $55 million for FY21 alone, but were of paramount importance to maintain our community’s safety, while at the same time keeping the University operational.

University revenues were also significantly impacted for FY21 with declines in excess of $30 million. This was driven primarily by major reductions in room and board, tuition revenue and other auxiliaries. With hundreds of students studying remotely in the Fall 2020 semester and Brown canceling numerous residential high school and athletics programs during summer 2020 for safety reasons, revenue losses increased quickly. To mitigate these significant revenue declines and expense impacts, the University increased the endowment payout by $22 million, put in place strict spending limits, added a tightly controlled hiring process for essential positions only, and temporarily reduced retirement contributions, in addition to senior administrators taking voluntary pay reductions. University leadership was deeply committed to ensuring that, through collective action, the effects of the public health crisis did not fall disproportionately on the most vulnerable members of our community. These efforts resulted in protecting our community from layoffs that so many other employers chose to enact first. 

As a result of the cumulative impacts of the pandemic, Brown finished FY21 with a $93.4 million deficit, as calculated on a GAAP basis1, which is significant in light of the University’s FY20 deficit of $8.9 million. This result, while not unexpected, will still be challenging to recover from in the short term. That said, Brown’s net assets saw tremendous market-driven growth to $7.8 billion, an increase of $2.3 billion over the prior year, and up 43% from the FY20 result. Total debt at the end of FY21 stood at $1.45 billion. The current portfolio of debt has an average maturity of 20.2 years and carries a 2.65% blended cost of capital, one of the lowest in the higher education sector. Even with an additional $400 million of new debt issued in FY21, Brown’s credit rating remained at AA+/Aa1 with S&P and Moody’s respectively, which is a testament to the ever-strengthening financial health of the University. 

The endowment continues to play a vital role in supporting the University’s operations. The Brown University endowment and other managed assets generated a remarkable $2.4 billion in investment income in FY21, equating to a 51.5% return, and bringing the endowment and other managed assets to an all-time high of $6.9 billion. Spending totaled 5% of the endowment’s 12-quarter average value. As planned last year, the University temporarily increased the budget appropriation from the endowment in FY21 by 0.20% to mitigate impacts of the pandemic. Fundraising has also been critically important to the University’s financial health, and last year Brown experienced another record year for contributions from its generous donors and alumni with $430.5 million in new gifts and pledges.

We now realize the pandemic will endure longer than first anticipated and, as a result, we will continue to refine and adjust our approach to best suit current circumstances. This will mean greater than anticipated pressures on the University’s budget for the foreseeable future, so we must plan accordingly. While we have seen remarkable growth in the University’s underlying financial strength this past year, driven primarily by the broader economic markets, the financial pressures created by the pandemic cannot be ignored and are clearly seen in our $93.4 million deficit. 

To address this, President Christina H. Paxson has established the Program on Innovation and Financial Sustainability, composed of several working groups that are focused on the long-term financial health of the University. Led by Provost Richard M. Locke, the program aims to focus specifically on improving targeted areas of revenue, as well as limiting or reducing various areas of expenditures. The program’s working groups will be conducting their work over the course of FY22 and beyond to ensure the long-term financial well-being of the University. We are incredibly well positioned to get through this difficult time due to the strength of our collective efforts and look ahead with optimism to Brown’s bright future.

I invite you to explore the FY21 results that follow regarding the overall financial health of the University.


Michael White
Chief Financial Officer, Brown University

1The GAAP (Generally Accepted Accounting Principles) deficit of $93.4 million includes major non-cash items, such as deferred revenue for the University’s third semester (which crossed fiscal years over the summer), depreciation, etc. It also includes the operating budget deficit of $52.2 million.

Review of the 2021 Financial Statements

The following materials outline the Fiscal Year 2021 financial performance of Brown University. The University’s financial statements were prepared in accordance with U.S Generally Accepted Accounting Principles (GAAP) and audited by our independent outside auditors from the firm KPMG LLP. The GAAP financials have been summarized for presentation purposes in the charts and tables presented below. 

Summary of GAAP Financial Statements

dollars in thousands
Balance sheet 2021 2020 % Change
Assets $9,793,108 $6,894,193 42%
Liabilities $1,978,977 $1,415,362 40%
Net assets $7,814,131 $5,478,831 43%
Total liabilities and net assets $9,793,108 $6,894,193 42%
Statement of activities 2021 2020 % Change
Operating revenues $965,599 $997,868 -3%
Operating expenses $1,058,957 $1,006,764 5%
Net operating activities -$93,358 -$8,896 949%
Nonoperating activities $2,428,658 $414,208 486%
Total change in net assets $2,335,300 $405,312 476%
Net assets, beginning of the year $5,478,831 $5,073,519 8%
Net assets, end of year $7,814,131 $5,478,831 43%
Cash flow 2021 2020 % Change
Change in net assets $2,335,300 $405,312 476%
Adjustments -$2,475,581 -$560,877 341%
Net cash used in operating activities -$140,281 -$155,565 -10%
Cash flows from investing activities  
Additions to land, buildings and equipment -$128,196 -$151,785 -16%
Net investments -$58,589 $65,672 -189%
Other -$3,411 $26,808 -113%
Net cash used from investing activities -$190,196 -$59,305 221%
Cash flows from financing activities  
Gift-related activities $201,613 $185,939 8%
Proceeds and payments on debt instruments $400,973 $272,772 47%
Net cash used from financing activities $602,586 $458,711 31%
Change in cash $272,109 $243,841 12%
Beginning cash balance $452,767 $208,926 117%
Ending cash balance $724,876 $452,767 60%

GAAP financials summarized for presentation purposes.

Net Assets

The University ended FY2021 with net assets of $7.8 billion, an increase of $2.3 billion (43%) despite recording an operating loss of ($93.4) million. This extraordinary growth of net assets was driven by endowment performance and gifts. Net investment return, after the endowment appropriation, totaled $2.2 billion, while gifts were $309 million. The cumulative change in net assets for the last five years total $3.6 billion.

GAAP statements summarized for presentation purposes.

Operating Revenue

The University’s total operating revenues declined by (3.2%) to $965.6 million in FY2021, down from $997.9 million in FY2020. The change in total revenue was driven by the one-time transition to three semesters for undergraduates in order to de-densify campus as a response to the COVID-19 pandemic. Only 50% of the third-semester undergraduate tuition, fees, room and board revenue is recognized is FY2021.

Total Revenue $965,599 (dollars in thousands)

GAAP statements summarized for presentation purposes.

Gross tuition declined by 10.1% ($62.2 million) to $553.7 million in FY2021 from $615.9 million in FY2020, while University scholarships grew by 2.8% to $222.9 million. The aforementioned one-time transition to three semesters as a response to the COVID-19 pandemic is the contributing factor to the reduction of gross revenue. Scholarships grew at a faster pace as a result of providing an increase in University scholarships to offset the requirement for undergraduates to have summer earnings included in their financial aid package. In aggregate, net tuition and fees declined by 17.1% year-over-year to $330.8 million. 

GAAP statements summarized for presentation purposes.

Grants and contracts revenue from government and private sources increased $26.8 million to $236.1 million, a 12.8% increase over FY2020. Of the increase, $9.4 million is Higher Education Emergency Relief (HEERF) funds received in FY2021. The HEERF funding included a student portion and was disbursed directly to students. An additional allocation of the HEERF funds was used to offset the University’s COVID-19 testing costs. The percentage of revenue from federal funding sources such as the National Institutes of Health, the National Science Foundation and the Department of Defense, remained consistent at 88% in FY2021 and FY2020, while there was a slight decline in the University’s effective indirect cost reimbursement rate from 33% in FY2020 to 32% in FY2021. Indirect cost reimbursement, which allows the University to recover certain overhead expenses related to grants, is a critical component of the operating budget as it broadly supports research at the University.

Operating revenue for current-use gifts increased by $7.0 million to $107.5 million in 2021. The strong increase in revenue is attributable to the continued generosity of cash and new pledges. 

For FY2021, the Corporation approved an endowment appropriation distribution increase to 5.00% from 4.85% in FY2020. This payout rate is applied to the average market value of the Brown endowment over the most recent three-year period. This increase in the endowment appropriation was a response to the COVID-19 pandemic to provide additional resources to the University. This appropriation of $182.1 million represents approximately 18.9% of the University’s operating revenue. 

Auxiliary revenue decreased significantly by -26.9% to $62.9 million for FY2021. Housing, dining and student health fees constituted just over 80% of these revenues. The pandemic negatively impacted all aspects of auxiliary revenue including housing, dining and bookstore-related revenue.

Operating Expenses

Total operating expenses for the University increased 5.2% to $1.06 billion in FY2021 from $1.01 billion in FY2020. Salaries, wages and benefits expenses, which represent over 50% of the operating expenses of the University, grew slightly by 1.7% to $546.1 million. Graduate student support, including scholarships and stipends, increased by 7.5% to $96.1 million. Non-compensation expenses increased by 9.6% to $416.7 million as a result of COVID-19 testing costs and an increase in interest expense from the FY2021 debt issuance, offset by a reduction in travel and discretionary expenses.

Total Operating Expense $1,058,957 (dollars in thousands)

GAAP statements summarized for presentation purposes.

Total salaries and wages slightly declined by -0.7%. In FY2021, in an effort to control costs, there were no merit increases for most faculty and staff and very few new staff positions. Conversely, employee benefits increased 10.3% to $127.2 million in FY2021. The University offered a staff voluntary retirement plan in FY2021; on a GAAP basis, the separation costs have been accrued at June 30, 2021. 

Balance Sheet

The Fiscal Year 2021 ended with significant increases to both assets and net assets when compared to FY2020.

Balance Sheet Summary

dollars in thousands
Balance Sheet 2021 2020 % Change
Cash and cash equivalents $724,876 $452,767 60%
Accounts receivable and other assets $91,975 $80,832 14%
Contributions receivable, net $306,557 $279,082 10%
Funds held in trust by others $50,114 $53,439 -6%
Right-of-use assets-operating $98,634 $0 100%
Investments $7,225,770 $4,766,897 52%
Land, building and equipment, net $1,295,182 $1,261,176 3%
  $9,793,108 $6,894,193 42%
Accounts payable and accrued liabilities $124,163 $91,564 36%
Liabilities associated with investments $38,313 $6,344 504%
Student deposits and grant advances $95,822 $49,754 93%
Operating lease obligations $99,172 $0 100%
Other long-term obligations $91,768 $111,859 -18%
Retirement obligations $74,938 $85,896 -13%
Bonds, loans and notes payable $1,454,801 $1,069,945 36%
  $1,978,977 $1,415,362 40%
Net assets
Without donor restrictions $1,567,060 $1,143,271 37%
With donor restrictions $6,247,071 $4,335,560 44%
  $7,814,131 $5,478,831 43%
Total liabilities and net assets $9,793,108 $6,894,193 42%


During FY2021, Brown investments grew to $7.2 billion. The endowment and other managed assets generated a 51.5% return in FY2021. Additional information on the endowment can be found later in this report, in the section prepared by the Brown University Investment Office. 


Total bonds, loans and notes payables increased from $1.1 billion in FY2021 to $1.5 billion in FY2020. The $385 million increase was driven by the $400 million issuance of additional Series 2020A taxable bonds offset by annual principal payments. The additional Series 2020A taxable bonds were issued at an effective interest rate of 2.92%, resulting in the University’s average cost of debt of 2.65% at June 30, 2021. The University has maintained its current ratings of AA+ by S&P Global Ratings and Aa1 by Moody’s Investor Services. 

Capital Expenditures

Brown invested $128 million in capital projects, building and equipment in FY2021, which is $24 million less compared to the FY2020 spend of $152 million. While overall spending declined, the University continued to contribute to a number of significant projects, including completion of the new health and wellness center and residence hall and ongoing construction efforts at the performing arts center.


Brown continues to thrive despite the many challenges brought on by COVID-19. The financial health of the University is anchored in the collective efforts of Brown’s amazing students, faculty and staff, the institution’s strong leadership and the generous contributions that members of the Brown Corporation make of their resources and time. The remarkable support from our donors, combined with the outstanding performance of the endowment, has greatly increased the University’s overall financial strength. These financial statements highlight that continued commitment from the Brown community and the desire to preserve the long-term financial sustainability of this great institution.

Endowment Report


For the fiscal year ending June 30, 2021, the Brown University endowment and other managed assets generated investment returns of $2.4 billion, an appreciation of 51.5%. After accounting for gifts to the endowment of $120 million, and net of investment returns, expenses and a contribution to the University's operating budget of $194 million, the endowment and other managed assets stood at $6.9 billion. The endowment began the fiscal year with $4.7 billion in assets. By any standard, this is an extraordinary single-year result for the endowment, and the growth will have a transformational impact on Brown’s financial support for current and future scholars.

In percentage terms, the gains are exceptional in the context of the historic returns for the endowment’s portfolio of investments. This report aims to illuminate the source of those returns and the unique circumstances of this year, while reflecting on the remote likelihood of such a return being repeated.

Before embarking on this examination, it is important to acknowledge that the human costs and devastation of the COVID-19 pandemic are ongoing. This gives rise to common questions of potential investment opportunism in the face of financial gains accruing during economic volatility tied to moments of national and international crisis. The Brown endowment’s investment program is intentionally designed to both withstand and adapt to unforeseen circumstances, though responding opportunistically to financial asset volatility should not be confused with opportunism. While the positive investments in Brown’s mission of scholarship and research that will ultimately result from the endowment’s appreciation this year will make a significant and meaningful impact, it is clear that these contributions cannot align with the scale of the pandemic’s devastation.

Fiscal Year 2021 was unique in many ways. However, what remains unchanged from year to year are the fundamental characteristics of the endowment's stewardship: partnerships with outstanding external investment managers; diversification across asset classes, geographies and industries; enthusiastic support from both the University and the broader Brown community; and prudent risk management executed by a committed team of investment professionals with oversight from an engaged Investment Committee.

Supporting the University

The endowment is a financial resource supporting the University’s mission of scholarship and research. It is the product of thousands of individual gifts that not only support the University but also shape its character through the specific designations of purpose that accompany the large majority of endowed gifts. These designations are stipulations of legal contracts with donors of individual gifts. Examples of such designations are gifts specified to fund endowed professorships, libraries, lectures, athletics and research programs. The largest portion goes to one of the University’s highest priorities, financial aid.

The endowment contributes between 4.5% and 5.5% of its value to the University each year. For FY20, spending totaled 4.9% of the endowment’s value. The specific percentage is determined by Brown’s governing body, the Corporation of Brown University, which temporarily increased the budget appropriation from the endowment in FY21 by 0.20% to mitigate budget impacts of the pandemic. 

This year’s annual contribution to the University of $194 million represents 5.0% of the endowment as measured on a trailing 12-quarter basis. The endowment’s contribution is calculated this way to provide University administrators with a more predictable stream of inflows than what can be reasonably expected from the changing prices of financial assets. As a result, the endowment’s contribution will not suddenly grow substantially in the coming year; rather, it will steadily increase year by year, barring a significant market downturn.

The endowment’s FY21 contribution represents 15% of the University operating budget. An alternative measure is $19,000 per student, annually. Both of these metrics are now certain to increase steadily in coming years as well.


It would be easy to interpret FY21 as a superb year of investment performance. It is the largest gain in dollar terms in the history of the endowment, which is natural for a pool of capital that is managed to appreciate over time.

However, it also would have been entirely possible, in this unique year, to produce an outstanding result in absolute terms but still have fallen short in capturing the extraordinary investment opportunities that were afforded by the market volatility that accompanied the crisis precipitated by the worldwide COVID-19 pandemic. For this reason, the performance must be benchmarked in multiple ways. The highest priority is exceeding the rate of spending in real terms — that is, net of the impact of inflation. Secondary priorities include remaining competitive with market indices and comparisons with peer institutions. This section will examine each of these priorities in turn.

Two interrelated caveats merit discussion. The first is that FY21 — the year from July 1, 2020, to June 30, 2021 — coincides with strong appreciation in financial assets as measured by broad market indices. The S&P 500 gained 40.8% during this period. The initial, destructive reaction of markets to the shock of the pandemic belongs largely to the prior fiscal year. By July 1, 2020, markets were already recovering, helped by substantial fiscal and monetary stimulus conducted on a global scale. The fact that FY21 captures the recovery but not the shock is happenstance.

The second, related caveat is that a single year — even a remarkable one — is an inadequate time frame to evaluate an investment program that is designed to achieve its goals over multiple decades. When assessing investment results for Brown, the longer the time frame, the more informative the result.

Those considerations notwithstanding, the results are strong.

Fiscal Year Annualized Returns

Annualized Returns as of June 30, 2021
  FY Annualized Returns as of June 30, 2021
  2021 3 Year 5 Year 10 Year 20 Year
Brown Endowment 51.5% 24.1% 19.6% 12.9% 10.3%
Aggregate Benchmark 43.6% 16.2% 13.9% 9.3% 7.1%
70-30 MSCI ACWI/Barclays Global Aggregate 27.4% 11.7% 11.0% 7.7% 6.8%
70-30 S&P 500/Barclays US Aggregate 27.3% 14.9% 13.3% 11.5% 7.7%
MSCI All-Country World (ACWI) 39.3% 14.6% 14.6% 9.9% 7.3%
MSCI All-Country World (ACWI) ex-US 35.7% 9.4% 11.1% 5.4% 6.5%
S&P 500 Index 40.8% 18.7% 17.6% 14.8% 8.6%

Aggregate benchmark is preliminary as of September 20, 2021.

1. Spending: As previously noted, the paramount standard for the endowment’s investment results is to exceed the rate of spending (5% this year), plus the rate of inflation relevant to Brown’s costs as measured by the Higher Education Price Index, which has averaged 3% over the last 20 years. The endowment’s FY21 results easily exceed this standard and have now done so for five consecutive years. The outcome is a rising overall contribution in both nominal and real terms to the University’s operating budget.

2. Benchmarks: No single market benchmark, examined over a single period of time, is sufficient to act as an appropriate yardstick for the endowment’s portfolio. A comprehensive measurement can be achieved, however, by examining the endowment’s performance against internally generated benchmarks, as well as market measures and combinations thereof.

The Aggregate Benchmark is a measurement maintained by the Brown Investment Office that combines the asset mix utilized by the endowment’s portfolio with index returns. The resulting difference between the endowment’s performance and the Aggregate Benchmark is an assessment of the incremental value contributed by Brown’s investment managers, net of fees and expenses. In FY21, the endowment’s portfolio gains (51.5%) outperformed the Aggregate Benchmark (43.5%) by 800 basis points, indicating a strong contribution from Brown’s investment partners. The endowment has now outperformed its Aggregate Benchmark over three-, five-, 10- and 20-year trailing periods.

The most appropriate external benchmark by which to measure Brown’s results is a blend of global stock and bond market indices. Global indices reflect the palette of investment opportunities available to the endowment, and a blend of equity and fixed income investments reflects the reality that the volatility of a portfolio of strictly listed equities would be incompatible with the financial planning needs of University programs, some of which draw the entirety of their budgets from the endowment’s annual contribution. Nonetheless, purely domestic and purely equity comparisons are included. Each represents an outcome that could be achieved through a passive, low-cost index strategy.

Brown’s results compare favorably across the board. The endowment’s Fiscal Year 2021 result nearly doubles the result of a global mix of 70% stocks and 30% bonds (27.4%), and has done so in all measured trailing periods. The same is true for a U.S.-only 70/30 portfolio: Brown’s results exceed the index in every trailing time period. Brown’s investment model — and that of other peers — relies on a committed group of volunteers acting as an Investment Committee, a dedicated team of professionals operating at modest cost working to build partnerships with outstanding external investment managers. Brown’s returns, which are stated net of all external and internal management fees and expenses, have now outperformed a purely domestic passive model by over 600 basis points annually over a trailing five-year period. Finally, Brown’s results have also exceeded the results of global stock markets as measured by the MSCI All-Country World Index, also in all trailing time periods. 

The Cambridge Associates College & University Universe is preliminary as of September 30, 2021 and includes data from 132 endowments.

3. Peers: A final measure of the success of Brown’s investment program should involve a comparison to similar programs, with similar missions, similar constraints and similar resources. While the endowment’s results have successfully exceeded the spending requirements, as well as surpassed the opportunities afforded to broad market participants, an assessment of the stewardship of the endowment would be incomplete without favorable results in relation to peer institutions. According to  data maintained by investment consultancy Cambridge Associates, Brown’s investment returns rival the absolute best outcomes, ranking comfortably in the top 5% of college and university endowments over each of one-, three-, five- and 10-year periods. Brown’s five-year returns of 19.6% surpass the threshold for the top 5% (returns of 16%) by a remarkable 360 basis points annually.

Liquidity Stress Test

The overwhelming majority of Brown’s endowment portfolio is managed in partnership with external asset managers with both specific and superlative expertise. Through this model, the endowment can achieve targeted exposures to attractive investment opportunities while simultaneously realizing the risk-mitigating effects of diversification. 

Some of Brown’s partners invest in often-termed liquid asset classes — predominantly Public Equities and Absolute Return — in which the underlying securities have the attractive characteristic of relatively quick, seamless conversion into spendable cash without significant frictional costs. Other partners invest in so-called illiquid asset classes — predominantly represented by Private Equity — which are not easily convertible into spendable cash but instead bear different, attractive characteristics that are in part a product of this illiquidity: inefficient pricing and the ability to affect long-term change through control positions. The delineation between liquid and illiquid asset classes is growing increasingly blurred, but it remains a useful framework nonetheless.

Participating in a mix of partnerships with liquid and illiquid features ultimately results in a measure of portfolio-level liquidity. This is a profoundly important metric. For the endowment to fulfill its most basic function, it must have sufficient liquidity to send contributions to the University on a quarterly basis, regardless of extenuating circumstances. However, in order to fulfill its mission to maintain and prudently grow the purchasing power of the endowment over time, the portfolio must be invested for high returns, thus accepting a degree of illiquidity. 

The appropriate balance of liquidity, therefore, is of paramount importance, and the Brown Investment Office models and monitors it carefully. Further complexity is introduced by the reality that the availability of capital is inherently circumstantial. Included in this modeling, then, are stress tests projecting steep sell-offs in financial markets, reductions in dividends and distributions from cash-flowing investments, and accelerated claims on promised but not yet completed investments. 

As the pandemic quickened in spring 2020, these stress tests became reality. The liquidity of the endowment’s portfolio was impinged from all sides, while the University’s costs swelled in response to necessary safety measures. The pandemic was the most severe test of the endowment’s liquidity since 2008, and all stakeholders in the endowment — current as well as future students, faculty, alumni, staff and parents — should all take assurance that even in an unprecedented crisis, the endowment’s liquidity remained strong and available.

Asset Allocation

The value of traditional asset classes as an organizing principle continues to dwindle. Many equity investors on both sides of the traditional public/private divide have decided to discard any such distinction. The implication of this trend for Brown’s investment program — aforementioned liquidity concerns notwithstanding — is not particularly significant. This is because Brown’s Investment Committee has eschewed the practice of conforming to a policy portfolio based on asset class weights, and instead has set wide ranges for asset class exposures. In a changing environment, this approach allows the discussion of a potential investment to set aside questions of categorization in favor of the most critical elements. Namely, does this partner have demonstrated ability, a verifiable record of high integrity, and a competitive advantage in pursuit of investments that have the potential to deviate from their intrinsic value?

Endowment Asset Allocation as of June 30, 2021

dollars in millions
Asset class Market value % of endowment
Public equity $1,371 20%
Absolute return $1,719 25%
Private equity $2,707 39%
Real assets $525 8%
Brown total risk assets $6,321 91%
Fixed income $369 5%
Hedges $4 0%
Cash and receivables $246 4%
Total endowment $6,940 100%

Nonetheless, despite the growing complexity, the portfolio can still be appropriately understood by categorizing investments into three large groups: Public Equity, Private Equity and Absolute Return, and two smaller groups: Real Assets and Fixed Income. Each generated a significant contribution during the fiscal year, resulting in a balanced overall performance. 

Public Equity: Public Equity strategies represent 19.8% of the endowment, or $1.4 billion. For FY21, Brown’s Public Equity portfolio generated a 58.9% return. This result handily exceeded the 39% return of the broad, global equity markets as represented by the MSCI World Index. Consistent with a pattern that has held for most of the past decade, U.S. markets outperformed International and Emerging Markets, albeit narrowly. This trend has been supportive for Brown’s Public Equity portfolio, which is weighted more heavily toward domestic exposure. Brown pursues predominantly actively managed strategies in Public Equities, despite an acknowledgement of the difficulty of consistently outperforming low-cost index funds by active managers. Fiscal Year 2021 afforded significant opportunities for active managers to add value for their partners, net of fees. When no inefficiencies exist to be capitalized upon by active managers, Brown seeks to supplement its Public Equity exposure with index funds at minimal cost. 

Absolute Return: Brown’s Absolute Return portfolio comprises a diverse set of strategies selected in part for characteristics that complement the overall portfolio. Considerations when compiling a portfolio of these strategies include but are not limited to: investing and research style, target geography, average market exposure, use of leverage, liquidity and turnover. The intended result is a collection of investments that is capable of generating equity-like returns over the long term, but with reduced volatility and correlation combined with acceptable overall liquidity, thus enabling re-allocation in the circumstance of a substantial price dislocation in an attractive market. Absolute Return is currently $1.7 billion, 24.8% of the endowment.  

Brown’s Absolute Return portfolio has performed its task exceedingly well in recent years, and outperformed the S&P 500 in each of the two prior fiscal years. This is a performance in excess of expectations considering that a portion of the group — Market Neutral strategies — seeks to take no market risk at all. This streak was unlikely to continue, and it ended in FY21. Absolute Return collectively generated a 15.3% return, falling short of expectations. 

The two predominant strategies represented in Brown’s Absolute Return portfolio are Long/Short Equity and Market Neutral, and elemental to each is the ability to effectively sell stocks short. Short-selling, though commonly misunderstood, is the legitimate activity of borrowing stock from its owner in order to sell it, and subsequently buying it back in the future in order to return it. This year saw relatively unprecedented challenges to the practice of short-selling enabled by a confluence of emergent factors: the communal cooperation of small traders organized on the internet; easy access to derivatives by inexperienced participants; and a large number of workers idled by the pandemic experimenting with stock trading. Regulators took notice and short-sellers, in some cases, took losses.

A lasting change in the effectiveness of short-selling would, in theory, impact the scale of the endowment’s use of some of its Absolute Return strategies. The Investment Office, having worked closely with Brown’s investment partners on this topic, does not believe this to be the case. Brown’s partners are selected in part for the dynamism of their organizations and strategies, and they have quickly adapted to these changing market conditions. In the long term, short-selling is an essential component of healthy securities markets, aids in price discovery and ultimately serves to help protect investors from bad actors.  

Private Equity: Brown’s Private Equity strategies employ $2.7 billion of capital, or 39% of the endowment. In Brown’s Private Equity portfolio, two models play leading roles: Buyouts and Venture Capital. Buyouts tend to be control investments in smaller companies with a focus on operational improvements and restructurings. Venture Capital investments are generally minority investments in immature, fast-growing companies. Both strategies are, for the most part, illiquid. 

In the prior fiscal year, Private Equity generated strong returns and this report warned earnestly of the cyclical nature of Private Equity strategies. Brown’s managers work for years identifying and nurturing their companies, helping them to find key employees, customers and sources of capital. Eventually, conditions must allow for value realization through a sale to a strategic buyer or a public offering of stock. Such investments can appear to have accrued only modest increases in value until such a sale, thus making returns from even a properly diversified portfolio of private equity investments somewhat inconsistent in nature, with several years of work concentrated into bursts of strong performance. By most indications, this was the case last year, leading to notes of caution in last year’s Endowment Report. 

This forecast proved incorrect. Brown’s Private Equity portfolio generated a spectacular return of 87.2% in FY21. Buyouts produced a 48% return, while Venture Capital produced a 114.1% return. Albeit with slightly weakened confidence, the assertion that this performance is not likely to be repeated is deserving of an echo. 

Venture Capital, in particular, is experiencing a set of virtually unmatched conditions. The disruption to consumer and business forums by digitally native solutions enabled by the combination of both mobile and cloud computing is an extraordinarily powerful trend. Public equity markets are greeting new issues — the exit path for the most successful venture investments — with exuberant valuations. The burden of high expectations accompanies those valuations, and only time will tell if years of profitable growth will reward today’s buyers.

Competitive advantages in investments are precious and rare, but long-duration capital is one, and Brown’s investment program is designed to maximize the advantage conferred by the permanence of the institution. Venture Capital requires a long time horizon — too long for many market participants — but offers the possibility of cumulatively exceptional returns. It therefore is well suited to remain a foundational pillar for the endowment, even if returns like those experienced this year are never repeated.

Real Assets and Fixed Income: Brown makes investments in real estate, infrastructure and commodities that are grouped together under the banner of Real Assets, which represents 7.6% of the endowment and generated a return of 93.8% for Fiscal Year 2021. In the case of Fixed Income, Brown uses a variety of approaches to access primarily corporate lending opportunities. These investments comprise 5.3% of the endowment and generated a return of 26.4%. Fixed Income and Real Assets each has been the focus of research, effort and new investment in recent years, and the results of FY21, though too brief to appropriately judge, are an encouraging data point and exceeded relevant asset class benchmarks. Fossil fuel-based energy investments, previously a component of the Real Assets category, are now a trivial amount of illiquid capital that represents exposure of effectively zero.      

Brown’s Investment Approach

Examining the investment returns for the endowment over the trailing 10-year period, the degree to which Fiscal Year 2021 stands out warrants comment. Is something different? Has some underlying characteristic of the endowment’s investment program shifted to precipitate such a result?

The Investment Office at Brown constructs the portfolio meticulously. Critically, however, it does not do so with a view of what the future holds. Rather, a foundational premise is that future events are unknowable, and the emergence of the global pandemic offers an example without parallel of this unpredictability. The goal of the Brown Investment Office is to construct a balanced portfolio that is capable of thriving in accommodative market environments and surviving in more difficult ones.

In this sense, the underlying characteristics of the endowment’s approach remain unchanged. They include partnerships with outstanding investment managers, reflecting long-term cooperation for mutual benefit with trust and alignment as the foundation upon which they are built. They include an emphasis on competitive advantage, a reliance on the guidance and oversight of an engaged Investment Committee, and a commitment to thinking empirically from first principles. And they include a constant focus on risk and a willingness to be aggressive when it becomes mispriced.

The Social Impact of Brown’s Investments

The importance of environmental, social and governance considerations in investments is steadily growing. The Brown endowment is playing a role, perhaps modest but important. Through dialogue with investment managers and other asset owners, as well as through formal statements of policy and intent, Brown’s investments are accompanied by a clear set of expectations for tangible progress. An area of particular focus is diversity, equity and inclusion, and an important process of data collection and structuring will enable monitoring of improvements in the diversity of the staffs of our managers, as well as our own.

Some of these actions are relatively new and also overdue. However, an aversion to investments in business models that seek to extract value rather than to create it for critical stakeholders has been a longstanding tenet of Brown’s partnerships. Investment managers are selected on the basis of not only ability but also integrity, and that integrity implicitly extends to the business practices of the underlying investments. That implicit understanding is now increasingly being made explicit.

In Closing

The results of Fiscal Year 2021 do not indicate success in the management of the endowment’s portfolio. Brown’s investment program is predicated on executing a repeatable investment process rooted in prudent risk management. From this perspective, FY21’s results are no more or less worthy of commendation than any other year in which this process was methodically executed.

The endowment’s success, rather, is measured entirely through its role as a financial resource for Brown’s mission of scholarship and research. The financial contribution of the endowment to Brown’s highest priorities — most particularly financial aid — is now more certain to grow in the coming years. Success for the endowment is substantially defined by the path toward eliminating cost as a barrier to a given individual’s ability to participate in Brown’s mission. In that regard, this year was marked by significant progress.

Fundraising Report

Fiscal Year 2021 was the most successful fundraising year in Brown’s history. More than 35,900 donors combined to contribute $430.5 million in new gifts and pledges. This total eclipses the previous record for a single fiscal year set in 2019 by nearly $10 million. Within this total, the University raised $302 million in cash, an increase of more than $50 million from FY20.

Total FY21 Giving: $430.5M

As the University grappled with issues created by the global COVID-19 pandemic and the resulting unstable economy, members of the Brown community came together to fund priorities that sustain academic excellence, access to a Brown education, research expansion and campus growth through the BrownTogether campaign. In particular, donors responded to the increased need for undergraduate financial aid with gifts totaling $57 million; provided $54.8 million for endowed faculty positions; committed $29.8 million to various high-level priorities at the Brown University School of Public Health; and gave more than $20 million in leadership gifts to support diversity, equity and inclusion initiatives.

International donors contributed $31.2 million, which included gifts to scholarships for international students, research funds for economics and the Watson Institute for International and Public Affairs, and multiple endowed chairs in applied math, public health and medicine. The University received more than $75.6 million in planned gifts and realized bequests, and saw grants and awards from corporations and foundations grow from 8% of total fundraising in FY20 to 11.6% of this year’s total.

The University was also able to launch the Center for Alzheimer’s Disease Research with $30 million in new gifts and establish the Center for Library Exploration and Research with an anonymous eight-figure gift.

Following the close of the 2021 fiscal year, the University was excited to share with the Brown community in October 2021 the historic milestone of reaching the $3 billion mark in the BrownTogether campaign. This would not have been possible without the generosity and commitment of the entire Brown community. The generosity of Brown’s donors is matched in full measure by the dedication of academic and administrative leaders who have given their time to the campaign.

Having reached the $3 billion goal ahead of the 2022 target end date, University leaders announced that fundraising for the campaign will continue, with the objective of fulfilling existing funding targets in some areas and building on the current momentum to help fund priorities that have emerged since the campaign’s launch. For instance, the opportunities for Brown to make a significant impact in public health became clear during the pandemic. The events of the past year have also underscored the importance of making a Brown education even more affordable for students from a wide range of backgrounds and income levels.

Below, we provide a snapshot of progress in key campaign priority areas from Fiscal Year 2021.

Our People

Goal: $1.019 billion
% Raised as of June 30, 2021: 79%

FY21 Highlights

Strengthening financial aid remains a major priority of the BrownTogether campaign. In FY21, the urgency increased as the need for financial assistance rose by approximately 12% among undergraduates, likely driven by the ongoing employment challenges and other hardships confronting families during the pandemic. Donors contributed a total of $57 million to undergraduate financial aid, including $16 million for the Brown Promise endowment, which allows Brown to build its undergraduate financial aid packages without including loans. The University also received an exceptional $20 million gift, half of which creates a scholarship program for military veterans, and half of which creates scholarships for the Resumed Undergraduate Education (RUE) program that enrolls students who delayed college because of military service, family obligations or other commitments.

Donors continued to support endowed faculty positions this year, with a total of $54.8 million in new gifts or commitments. This generosity created 19 new endowed professorships, bringing the total established during the BrownTogether campaign to 107. The positions help Brown retain and recruit top talent and were established in public health, mathematics, economics, brain science, history, computer science, medicine and public and international affairs, among other disciplines. Two of these new positions are part of the Provost’s Professorship Initiative, which aims to raise professorships that provide additional flexibility to the senior academic administration as Brown identifies new areas in which to strengthen scholarship, research and teaching. These positions support distinguished junior and senior faculty working in the highest-priority areas for the University, thus enhancing Brown’s ability to expand scholarly expertise for new initiatives and invest in fields that are poised for growth.

The University also received two gifts of $5 million each to endow the directors’ positions at the Pembroke Center for Teaching and Research on Women (the largest gift to date in the center’s history) and at the Center for the Study of Race and Ethnicity in America. These gifts provide resources to bolster programming and continue breaking down barriers related to race, ethnicity, gender, sexuality and other identities through research and engagement.

Education and Research

Goal: $804 million
% Raised as of June 30, 2021: 141%

FY21 Highlights

Donors placed strong emphasis on funding education and research in areas where Brown is well positioned to lead the way forward. Two gifts totaling $30 million enabled the University to launch the Center for Alzheimer’s Disease Research in April 2021. The center integrates existing expertise within the Robert J. and Nancy D. Carney Institute for Brain Science and the University’s Division of Biology and Medicine to advance experimental techniques, joint projects across departments and promising clinical trials focused on early detection and effective treatment.

Dean Ashish K. Jha brought new leadership to the School of Public Health and quickly became a leading voice on strategies to mitigate challenges related to COVID-19. Donors responded positively to his top priorities by committing $29.8 million to the school in FY21. This includes two new endowed professorships, $11 million to support a center for pandemic preparedness and $1.6 million to support the Health Equity Scholars Program. The Health Equity Scholars Program provides funding for Master of Public Health candidates from historically Black colleges and universities.

The 2021 fiscal year was also a highly successful year for support from corporations and foundations. The Center for the Study of Slavery and Justice at Brown was the recipient, in partnership with Williams College and the Mystic Seaport Museum, of a $4.9 million Mellon Foundation grant to use maritime history as a basis to generate new insights on the relationship between European colonization in North America, the dispossession of Native American land, and racial slavery in New England. The JPB Foundation awarded $1.5 million to support Professor of Economics John Friedman’s work with the American Opportunity Study Project, and a $1 million grant was approved by the Keck Foundation to support the development of a 10 million frames-per-second infrared microscope by engineering professors Pradeep Guduru and Jacob Rosenstein.

In addition, the Wyncote Foundation based in Pennsylvania helped create a $5 million endowment to support the work of the Center for the Study of Slavery and Justice and issued a challenge for donors to match that $5 million for a total of $10 million.

This year the Brown University Library received one of the biggest gifts in its history from anonymous donors to create the Center for Library Exploration and Research. With hubs in the Rockefeller Library, the John Hay Library and the Sciences Library, the center will strengthen academic excellence, fuel innovative scholarship and extend the library’s impact beyond campus, bringing research resources and collections to more adults and K-12 students in the greater community.

In addition, the Department of Computer Science received a seven-figure gift to jumpstart its Socially Responsible Computing Initiative, which will support education and research related to the impact of technologies on society, communities and the environment; equity in computing across industries; and the development of technologies to address pressing societal challenges.

Campus and Community

Goal: $792 million
% Raised as of June 30, 2021: 73%

FY21 Highlights

Brown’s campus and community initiatives continue to evolve thanks to the generosity of multiple donors. Non-alumni parents made two multimillion-dollar gifts toward enhancing campus facilities: one to support the construction and naming of a new residence hall on Brook Street and one to fund the renovation of 22 Benevolent St., which will become the new home of the University’s LGBTQ Center. 

Brown’s athletic programs have returned to competition in 2021 and are benefiting from donor support for facilities, coaching, travel and training resources. An alumnus and past parent endowed the vice president for athletics and recreation position with a gift of $10 million. Another alumnus made a gift that supported the upgrade of Brown Stadium’s football field from natural grass to synthetic turf. Donors established an endowed assistant coaching chair for women’s water polo, and strengthened the endowment funding for both water polo and track and field with six-figure gifts.  

Brown Annual Fund

Goal: $400 million
% Raised as of June 30, 2021: 81%

FY21 Highlights

In FY21, the Brown Annual Fund (BAF) family of funds — which includes The Brown Fund, three professional school funds and four targeted impact funds — raised $47.3 million from 31,561 donors, a new all-time high. This total included $36.1 million in unrestricted, immediate-use funding through The Brown Fund and a record-breaking $8.4 million through the Parents Fund. In addition, the School of Public Health Annual Fund saw a 50% increase in dollars and a 67% increase in donors over its FY20 totals.

Giving Tuesday, held December 1, 2020, was once again a record-setting giving day for the Annual Fund in terms of both dollars and donors. Overall, the University raised $4.1 million from 4,945 donors and earned a $500,000 giving day match in full, bringing the total for the day to $4.6 million. Participation came from across the Brown community, including undergraduate alumni from the Class of 1945 through the Class of 2020. The Brown Medical Annual Fund received gifts totaling $104,620 from 137 donors (a giving day dollars record), and the School of Engineering Annual Fund received gifts totaling $81,295 from 127 donors (another giving day record for both dollars and donors).

Overall, the Athletics Annual Fund raised $4.4 million. The Brown University Sports Foundation held Bruno Gives Back Day in October 2020, netting more than $1.7 million in current-use funding from more than 4,000 donors. Both the track and field/cross country and crew programs broke the $200,000 mark for the day. 

In terms of BAF impact funds, the Inman Page Council BAF Scholarship, which provides financial aid for Black and African American undergraduates, raised $1.2 million in gifts, including $500,000 in challenge funds. There was also a 93% increase from FY20 in donors to BAF diversity initiatives. 

Even during a time of continued uncertainty, the enduring generosity of Brown’s donors sustains critical support for high-impact research and scholarship and the opportunities provided by Brown’s residential educational experience. 

Fundraising Report contributed by Brown University’s Division of Advancement