MIT Endowment

September 19, 2022
By AdmissionSight

MIT Endowment

What is the current MIT Endowment? The MIT Endowment serves as the Institute’s primary source of funding. The MIT endowment is a permanent resource that was developed by MIT’s benefactors to assist MIT’s current and future scholars. It generates an annual income stream for today while also maintaining the endowment for future generations of researchers. Also making it an establishment with a focus on the long term.

The endowment for the Massachusetts Institute of Technology is comprised of more than 3,800 separate funds. These funds, which are donations from MIT’s donors, are administered collaboratively, and their investments are made to last forever.

Group of people talking in a meeting.

Almost every facet of MIT’s operations, including scholarships, fellowships, professorships, and student life, as well as the activities of its schools, departments, labs, and centers, are funded by annual income from endowment investments. MIT is a world-renowned institution of higher education.

How much is MIT Endowment?

How much is MIT Endowment? On October 14, MIT shared the news that its endowment has performed exceptionally well for the fiscal year that will expire on June 30, 2021. On the same day, President L. Rafael Reif issued a letter to the community of MIT in which he announced that the Institute’s return on pooled assets had reached a 55.5% return, which he referred to as “its highest annual performance in more than 20 years.”

The endowment of MIT increased by 49.0%, or $9 billion, from its previous value of $18.4 billion in 2020 to $27.4 billion in 2021. The institution’s endowment accounts for the largest share of its total investments.

Two students talking to a professor.

Additionally, the Report of the Treasurer for the fiscal year was made public by MIT. According to what was written in the report by Executive Vice President and Treasurer Glen Shor, MIT finished the year with net results of $216.4 million.

“designed to help present and future generations of MIT academics,” the endowment is MIT’s way of saying “thank you.” According to MIT News, it is put toward things like “education, research, campus rejuvenation, faculty work, and student financial aid.” These are just a few of the uses for the money.

According to Reif stated, the investment pool that includes the endowment contributed $851 million, which is equivalent to around 30 percent of MIT’s operational revenues for the most recent fiscal year. This encompassed “everything from utilities to support for teaching and learning to the sudden requirement for a community-wide Covid testing system,” as stated in the citation.

The “gifts from alumni and friends” that make up endowments are made with the expectation that the “funds will be invested in ways that provide continued benefits over a very long period of time.” There are over 4,400 separate funds that make up the MIT endowment. MIT has a subsidiary known as the MIT Investment Management Company (MITIMCo) that is in charge of overseeing the endowment.

Therefore, endowments can either be restricted by the donor or not, which means that they are not typically “permanently designated by the donor for a certain purpose,” as Reif stated in his article. The “spending priorities for the new cash” may become more difficult to achieve as a result of this. Endowments that have limits placed on them by donors make up the largest portion of salaries and wages, departments and research, and undergraduate areas, respectively.

In the letter, Reif stated that because of the increase in the endowment, MIT is now able to “put these profits to use more swiftly” while also “maintaining sufficient balances to meet future needs.”

Reif made the announcement that, as a result of this year’s extraordinary performance, MIT will increase endowment distribution by thirty percent for the fiscal year 2023. In the past, the Massachusetts Institute of Technology was only able to “raise endowment support for campus operations” by about “4.5 percent each year.”

Additionally, Reif announced that beginning on December 1, “campus-based, benefits-eligible staff, and teachers” will be eligible to earn a “special 3 percent base wage raise.” A stipend rise of three percent will also be given to “RAs, TAs, graduate students with fellowship appointments, and postdocs.”

According to a letter that Reif sent to the MIT News, he stated that “additional funds will be spent in ways that benefit students at all levels, and make the Institute more capable of delivering the cutting-edge research and science the world needs.” The identification of such essential goals is the responsibility of the Task Force for 2021 and Beyond.

Shor mirrored Reif’s sentiments in the treasurer’s report, stating that “using MIT’s expertise to unleash breakthrough solutions to climate change” is “foremost” among the “priorities.” Reif had previously stated this sentiment. This includes the Institute’s plan, titled “Fast Forward: MIT’s Climate Action Plan for the Decade,” which aims to “accomplish the goal of decarbonizing the world economy by 2050.”

Shor mentioned in the report that the institute “continued to achieve outstanding financial success” despite the “immense obstacles of operating in the COVID-19 pandemic environment.” This was mentioned in the report that the treasurer prepared.

In order to “anticipate strains on its budget from the need to adjust to COVID-19,” the Massachusetts Institute of Technology (MIT) “initiated targeted cost cuts” before the beginning of the fiscal year 2021. A “lower on-campus presence and pandemic-induced constraints” were two of the pressures that led to a “loss of student-related revenue” and a “one-time subsidy to teachers and staff to assist with heightened childcare demands.”

In comparison to other comparable institutions, such as Harvard University, which reported an increase in returns of 33.6%, and Yale University, which recorded an increase of 40.2%, MIT reported the highest rise in returns at 55.5%.

What is an Endowment?

What is an Endowment? The purpose of the endowment at MIT is to provide current and future generations of MIT academics with the resources necessary to further knowledge, research, and innovation in their respective fields. As a result, the monies from the endowment are utilized for activities associated with the Institute, such as education, research, campus renewal, the work of the faculty, and student financial aid.

Returns on the unitized investment pool that contains the MIT endowment provided $851 million during the most recent fiscal year, which corresponds to around 30 percent of total campus operating revenues.

According to the standard endowment spending formula used by the Institute, which is intended to even out the highs and lows of market returns over time and guarantee stable funding for the institution’s education and research programs, the deployment of the unanticipated gains from the previous year to support MIT’s operations would be significantly postponed.

The return of 55.5% over the past fiscal year on the investment pool that contains MIT’s endowment enables the Institute to put these earnings to use more swiftly while still keeping suitable balances to meet future requirements.

Two female students studying in a living room.

As a consequence, the Massachusetts Institute of Technology (MIT) intends to boost the payout from its endowment by thirty percent beginning in the fiscal year 2023 (which begins on July 1, 2022), with the objective of “accelerating the work the world needs right now and deepening the support our students need,” according to Schmidt.

Taking this action will result in an expected increase of $286 million in additional resources that can be used during the upcoming fiscal year to support the work done by the MIT community. Additionally, it will establish a new standard for the level of endowment support for the budget in the years to come.

Glen Shor, who serves as both the executive vice president and treasurer of the company, claims that they have “strived to build a precisely calibrated approach.” “The actions that we are taking strike a balance between the requirements of today for meaningful investment in the Institute and the careful maintenance of our endowment for the benefit of future generations of students,”

Endowment donations assist the Institute to cover everything from utilities to support for teaching and learning to the sudden need for a community-wide Covid testing system. Endowment monies help the Institute handle all of these costs. The need-blind undergraduate admissions policy of the Institute is supported by funds from the endowment, and this policy assures that education from MIT is available to all competent students regardless of their financial capabilities.

MIT develops an individual affordability plan for each family that is eligible for financial aid by working closely with those families to create a plan that is tailored to their specific financial circumstances. In the academic year 2020-21, the need-based MIT scholarship awarded on average was $45,146.

To assist in defraying the costs associated with the pandemic, the Massachusetts Institute of Technology (MIT) granted an additional $21.8 million in financial aid ($5,000 to each student) in the fall of 2020. 57% of MIT undergraduates received financial help based on their demonstrated financial need, while 38% of MIT undergraduates received scholarship support from MIT and other sources that were sufficient to cover the full cost of tuition.

The majority of MIT’s endowment is comprised of “endowment gifts,” which are contributions made by alumni and friends of the institution with the understanding that the money will be invested in a manner that will result in continued benefits for an extended period of time.

These kinds of donations are frequently given with the stipulation that they can only be put toward specific kinds of expenditures, such as need-based scholarships, instance, and that they cannot be used for any other reason. Because of this, the Institute for Advanced Study (MIT) is restricted in the spending priorities it can establish for the new monies due to the endowment.

What Investment Firm handles MIT Endowment?

What Investment Firm handles MIT Endowment? The gains that are created through investing in the Institute’s financial resources are used by the MIT Investment Management Company as a source of funding for the Institute.

Group of people talking while using a laptop.

The revenues that MIT generates from its assets provide funding for a diverse range of academic and research endeavors. The President of the Institute and the Board of Directors of MITIMCo are the parties to whom MITIMCo is accountable. The MIT Executive Committee is responsible for the appointment of new board members to MITIMCo.

Cambridge Real Estate Team

The investment real estate properties in Cambridge that belong to MIT are managed by the Cambridge Real Estate Team. This includes the following:

  • Preserving and enhancing the already high standard of the creative atmosphere in Cambridge and the neighborhoods surrounding the campus
  • Developing ways for the Institute to receive direct financial support
  • Making certain that the Institute has sufficient amounts of adaptable space to meet its developing long-term needs

Global Investment Team

The Investment Team is responsible for sourcing, carrying out, and managing investments. This necessitates:

  • Providing assistance to active managers by acting as excellent partners
  • Exploring the entire world in search of extraordinary individuals and promising business prospects
  • Distributing financial resources in a top-down fashion

Operations Team

The Operations Team is responsible for providing the infrastructure that underpins the investment procedure and ensuring that the integrity of the financial reports is maintained. These are the following:

  • Serving as a dependable information resource that delivers accurate reports, data, and analysis in a timely manner
  • Keeping up strong relationships with internal associates, external service providers, investment affiliates, contributors, and other interested parties, as well as maintaining open lines of communication with these groups
  • Developing the necessary infrastructure to coordinate and plan for the fulfillment of operational requirements for new investments
  • Making consistent progress toward increasing the effectiveness of operational processes

Where is MIT Endowment Invested?

Where is MIT Endowment Invested? The MIT Endowment will make it possible to provide more financial assistance to undergraduate and graduate students, as well as to make investments in research operations that will increase the institution’s ability to promote ground-breaking science and technology.

Using valuations received within one month of the end of the fiscal year, the unitized pool of endowment and other MIT funds at the Institute recorded an investment return of 55.5 percent during the fiscal year ending June 30, 2021. This was the Institute’s strongest annual performance in more than 20 years. The value of the MIT endowment increased by $9 billion by the time the fiscal year came to a close, reaching a total of $27.4 billion.

MIT’s President L. Rafael Reif, Chancellor Melissa Nobles, and Vice President for Research Maria Zuber sent out a series of letters to the institute’s faculty, employees, students, and postdocs today, in which they informed them of the news. Additionally, today saw the release of MIT’s Report of the Treasurer for the fiscal year 2021.

President Reif states that “this is an opportunity that comes around once in a generation,” and that “we must use it in a way that stimulates big ideas and develops a stronger MIT at a time when the world needs discoveries in science more than it has ever needed them before.”

According to Reif, the newly acquired money will be used in a manner that will be advantageous to students of all levels and will make the Institute more capable of promoting the cutting-edge research and science that the world requires.

Group of students looking at a laptop in a table.

The reports of MIT’s visiting committees, which examine and advise on every aspect of the Institute, as well as Task Force 2021 and Beyond (TF21), an MIT-wide process of mapping the future of the Institute that was launched shortly after the beginning of Covid-19, have helped identify key priorities. The following are some of the priorities that have been recognized by TF21 and the visiting committees:

  • increased financial support for the 7,000 graduate students who are enrolled at MIT, who are contending with growing housing expenses in the Boston area, and the majority of whom contribute directly to research and teaching;
  • enhancing student life by continuing to improve campus buildings, enhancing classroom and digital learning experiences, and providing more support to increase the likelihood of success at MIT; and
  • Increasing the amount of money invested by MIT in essential research infrastructure, such as increased computing capacity.

In addition to the opportunities for community feedback that have been made available through TF21, which has involved over two hundred members of the MIT faculty, staff, and student body, as well as alumni and student advisory boards, members of the MIT community will have opportunities to provide input on spending priorities during the budget process that takes place each fall.

According to Provost Martin Schmidt, “Budgeting is an act of balancing.” Our goal of increasing our knowledge and expanding our horizons will be just as important in the days to come as it is right now. When we unlock any of these advantages to make MIT’s work stronger right now, we need to make sure that we do so in a way that ensures that our work will continue to be strong in the long run. In order to see results, scientific and technological advancements frequently demand unwavering support over the course of a number of years. Our goal is to find a compelling middle ground between the two extremes.”

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