During the last major economic recession, Haverford became notorious, and not in a good way. The college’s endowment dropped by over $100 million, or about 33% of its value, more than the vast majority of other institutions of higher education. But this time around, Haverford seems to have weathered the coronavirus-induced downturn with relative ease, thanks to prudent fiscal management implemented after the 2008 crisis and a healthy dose of assistance from a booming stock market.
At the end of the 2020 fiscal year, which spans from July 1, 2019, to June 31, 2020, the endowment saw investment returns of −1.3%, dropping to $503.4 million after gifts and withdrawals. At the end of the previous fiscal year, the endowment had contained $526.8 million, representing years of growth. Since Haverford relies on investment income for about a quarter of its annual budget, this has helped bring the college’s finances to the edge of breaking even.
Source: Haverford College financial reports. FY 2021 returns only cover period of July 1, 2020 through December 31, 2020.
According to the annual letter from the Investment Office, released in November 2020, the college pulled $26.0 million from the endowment in support of “the College’s academic mission, scholarship, and operations” in FY 2020. This is only $0.6 million more than was used in FY 2019. These costs, notably, do not include the efforts to bring students back to campus during the pandemic incurred from July 2020 onward.
Despite significant dips taken by the stock market in early 2020, by the end of the fiscal year, the endowment had stanched the red ink, seeing investment losses of only $7.2 million. For perspective, the endowment was bolstered by $9.6 million in gifts and inflows through the same period. In FY 2019, the endowment had investment returns of $27.7 million and gifts and inflows of $5.7 million.
The endowment’s FY 2020 loss of 1.3% was on par with similarly sized institutions that year. Organizations within the Cambridge Associates universe of endowments and foundations reported returns between −5.7% to +5.4%, though the median return was 1.5%.
Based on current economic trends, the future of the endowment is more certain than it was last year. According to the report from the February 2021 meetings of the Board of Managers, the anticipated budget deficit is still approximately in line with what was predicted in October 2020. The board approved this deficit to maintain Haverford’s academic program through the COVID-19 pandemic.
At the moment, the endowment is back in an upswing, as the market soars even beyond its pre-pandemic heights. As of December 31, 2020, the endowment “reached an estimated, unaudited value of $570.7 million and a fiscal year-to-date return since July 1, 2020, of +15.3% as of December 31, 2020.”
Despite market uncertainty in mid-FY 2020, the Investment Committee of the Board of Managers approved an increased level of risk assumed by the endowment in pursuit of high long-term returns, though the impacts of this decision have not yet been seen in actual investment patterns.
This change may mark a departure from a decade-long pattern of fiscal conservatism by the college. Since the 2008 endowment disaster, the college has taken several steps to tighten its belt, including ending need-blind admissions in 2016.
According to a letter released by the Board of Managers in June 2020, the long-awaited accomplishment of breaking even was again put out of reach by “the College’s desire to moderate the level of expense reductions within the FY 2020–21 budget” and “the economic consequences of the pandemic.” As a result, once the pandemic abates, President Wendy Raymond will be faced with yet another task: finally eliminating Haverford’s budget deficits.