Amay Tewari, Photography Editor

The Yale Investments Office reported that the endowment earned a 6.8 percent return for the latest fiscal year, a surprising figure given the pandemic’s economic effects.

According to a press release from the Yale Investments Office, the University’s endowment reached a total of $31.2 billion for the fiscal year ending June 30, 2020. Although this year’s returns are 1.45 percent shy of the annual target rate of 8.25 percent, the endowment still increased by $900 million amid the economic uncertainty prompted by the coronavirus pandemic. During the 2019 fiscal year, the endowment had a 5.7 return rate, bringing the 2019 total to $30.3 billion.

“The University recently announced an unexpectedly strong financial performance in the 2020 fiscal year, thanks to the work of faculty and staff across the campus who restrained spending, the generosity of our donors, the outstanding efforts of the Yale Investments team and the better-than-anticipated financial markets,” University spokesperson Karen Peart wrote in an email to the News. “While we are encouraged by these results, we remain concerned about the longer-term economic and financial effects of the pandemic, particularly if the virus persists.”

Yale’s spending and investment policies balance the short-term need to support current students and the long-term financial health of the University, according to the press release.

According to John Geanakoplos, former chair of the Faculty of Arts and Sciences Senate and professor of economics, the endowment’s performance is just about what he expected given what he knows about the market today — and was much better than what people feared when COVID-19 disrupted the market in the spring.

Geanakoplos added that since University finances turned out less badly than what some had feared — with the 6.8 percent returns closely approaching the target rate of 8.25 percent returns — Yale should use this as an opportunity to maintain its excellence for the future. Namely, Geanakoplos believes that the University should use its current financial health as an opportunity to hire faculty and graduate students, since other top-tier universities with smaller endowments likely cannot afford to do so.

“We literally have the money that these other universities don’t have,” said Geanakoplos. “Fortunes are made and organizations are transformed when you buy low. It’s often the case that many people see the opportunity, but they don’t have the money to do anything about it. Right now, we have the money and we can see the opportunity to make those hires … To see the opportunity and have the money at the same time, that’s rare.”

In an April letter to the Yale community, University Provost Scott Strobel and Senior Vice President for Operations Jack Callahan ’80 announced a University-wide hiring pause for all faculty and staff positions through June 30, 2021, citing the University’s financial difficulties. The hiring freeze applied to all open faculty and staff positions, except for rare exceptions that had to be approved directly by the provost’s office.

Last week, the pair sent an update informing the Yale community of a partial lift to the faculty hiring freeze. The University expects to approve at least 60 new and continuing faculty searches across the professional schools and the Faculty of Arts and Sciences, according to Strobel and Callahan.

Earlier this summer, while Geanakoplos was chair, the FAS Senate published three reports regarding University financial policy during the pandemic. In one of them, entitled “Three Lessons from Past Financial Crises at Yale,” Geanakoplos identified three main lessons the University can learn from previous financial crises to help understand the COVID-19 financial impact. The lessons emphasize not panicking about the potential for lost wealth and not trying to save money during a crisis by cutting services crucial to Yale’s teaching and research mission — as well as the importance of faculty governance and input during a crisis.

In another report, Geanakoplos focused on the rationale for the Yale endowment spending rule, which is to maintain stable spending in the face of unexpected losses or gains to University wealth. In the third report, the FAS Senate explains the ramifications of cutting too much spending too quickly as well as the importance of preserving the teaching and research mission of the University.

“The fact that we have such a big endowment, and that Swensen has managed it so well, puts us in a rarified set of advantaged schools, with a big opportunity not to make abrupt, and therefore unnecessarily damaging, cuts,” wrote Geanakoplos in a June 2020 report entitled “The Yale Endowment Spending Rule and the COVID-19 Crisis.”

David F. Swensen is Yale’s Chief Investment Officer.

Peart told the News that the University took “prudent, cost-saving measures” to respond to the pandemic. She added that the pandemic has cost the University over $250 million in lost revenue and COVID-related expenses, with costs still accumulating.

Peart added that the University’s cost-saving measures take into account the ongoing uncertainty about the length, depth and nature of future public health and financial challenges.

“Yale has made some conscious choices about where not to cut,” Peart wrote. “We have avoided the harsher measures taken by some of our peer institutions, such as furloughing employees, cutting salaries or suspending contributions to employee retirement plans.”

According to Charles Skorina, managing partner of an executive search firm that specializes in hiring chief investment officers, managing an endowment requires a careful trade-off between spending today and saving for tomorrow.

Many individuals often question why the University cannot just spend more out of its endowment in times of financial hardship or emergency. But as per the Investments Office press release, nearly three quarters of endowment spending is contractually obligated to be allocated to specific purposes within the University, like scholarships or donor-designated programs. Ultimately, endowment spending is determined by the University’s spending policy, which aims to balance the objectives of providing a stable flow of income to the operating budget while also protecting the real value of the endowment.

According to the 2019 Endowment Update, the target spending rate approved by the Yale Corporation — the chief governing body of Yale — is 5.25 percent. The recent Investment Office press release stated that Yale expects to spend $1.5 billion of its $31.2 billion endowment this fiscal year.

“I understand the desire to increase endowment contributions, and I suspect that there is some leeway there,” said Skorina. “But you have to keep in mind that every dollar you take out is a dollar less for future generations of students.”

The University’s endowment value increased from $30.3 billion on June 30, 2019, to $31.2 billion on June 30, 2020.

Julia Bialek |

Julia Brown |

Julia Bialek currently serves as a public editor for the Yale Daily News. Previously, she covered the student policy & affairs beat as a reporter on the university desk. Originally from Chappaqua, New York, Julia is a junior in Saybrook College studying political science and history.
Julia Brown served as University Editor on the Managing Board of 2023. Previously, she covered the University's graduate and professional schools as a staff reporter. She graduated cum laude from Yale University with a B.A. in Economics & Mathematics.