Endowment Investment Report

Endowment Investment 2021–2022 Report

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his report on Wheaton College’s endowment covers the 2022 fiscal year, ending on June 30, 2022. The endowment ended the year at $241.5 million and included $22 million of negative investment returns plus $8 million in new gifts. Despite a reduction in market value during the 2022 fiscal year, driven by the downturn in global markets, our total investment returns continue to compare favorably to relevant indices.

The college’s endowment is critically important to Wheaton’s future and helps sustain educational excellence. It ensures that a Wheaton education remains accessible to students, supports faculty teaching and scholarship, provides the flexibility to make strategic investments that enhance educational programs, and strengthens the institution for the future.

Fundamentally, the college’s endowment is an intergenerational gift. It began with the Wheaton family’s estate and has grown over the years through the generosity and foresight of alumni, parents, families and friends who want to ensure that Wheaton’s distinctive educational opportunities are available for the students of today and tomorrow. We are both honored by, and take seriously, the responsibility of stewardship as we lead the effort to preserve and grow this resource for the present and the future of Wheaton.

Janet Lindholm Lebovitz ’72 Chair, Board of Trustees Maryann E. Carroll ‘79 Trustee and Chair, Investment Committee

Endowment at a glance

$241.5 million Value of the endowment

$11.5 million Distribution to Wheaton’s operating budget

Fiscal Year 2022

14% Portion of Wheaton’s operating budget supported by the endowment

662 Number of individual endowed funds

(8.6%) One-year annual return

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Endowment overview The value of Wheaton’s endowment decreased to $241.5 million in the 2022 fiscal year, which ended onJune 30, 2022. That decline resulted from the recent substantial downturn in global markets. Yet our investment performance continues to compare favorably with relevant investment indices.

The college endowment’s $25.4 million net decline in the 2022 fiscal year came from investment performance offset by generous philanthropic contributions. For the year, the funds realized a total of $22 million in investment losses and the addition of $8 million in gifts from alumni, parents, families and friends. The endowment’s year-end total also reflects the $11.5 million distribution from the funds to support the college’s operating budget during the fiscal year.

Table 1

Endowment changes in FY ’22

Thousands

Beginning value

$266,878

Net investment return

($21,975)

Gifts and additions

$8,003

Distribution

($11,442)

Ending value total

$241.464

Endowment value over time

Figure 1

$300M

$266.9

$193.5

$200M Fair market value

Fiscal Year ’22 Endowment

$205

$194.7

$176.1

$211.9

$241.5

$213 $210.6

$184.8

$159.5

$100M

$0M

2

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

Measuring investment performance

The annual average return on the endowment portfolio provides a critical measurement of the college’s investment strategy. The objective as stated in the Investment Committee’s policy is to realize a return that is equal to the long-term inflation rate plus five percent. The target reflects the overall goal of preserving the long-term purchasing power of the endowment while generating revenue to support college operations. Over the past decade, the college’s endowment investment results have consistently outperformed the committee’s goal.

Investment returns vs. objective 10%

Figure 2

13.5%

9.2%

5.7%

6.4% Annual returns

We recognize that past is not prologue and as we have seen in the 2022 fiscal year, there will inevitably be periods when investment returns will be more challenging.

As constructed, we believe the endowment portfolio is wellpositioned to weather more difficult markets and will be well served by our commitment to a long-term, disciplined investment strategy.

8.3%

7%

7.3%

5%

(8.6%)

0%

1-Year

3-Year

5-Year

10-Year

Annual returns Investment objective

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Managing the endowment The overall investment objective for Wheaton’s endowment funds is to preserve their purchasing power in order to provide a growing stream of endowment support for the college’s programs. The college seeks to achieve on average an annual total rate of return equal to the long-term inflation rate plus the annual spending rate, or draw, of the college. (i.e., CPI + 5%)

A fundamental piece of the investment strategy for the college’s endowment centers on diversification—diversification of the types of assets in which funds are invested as well as geographic diversification across domestic, international and emerging markets. The Investment Committee of the Board sets target ranges for each asset class and reviews the college’s portfolio against these guidelines regularly throughout the year, rebalancing holdings when necessary. The current asset class breakdown is shown in Table 2.

Wheaton’s endowment is structured to capture a significant portion of upside in world equity markets, while limiting its downside exposure when markets are under pressure. In the seven years to FY22, the endowment captured 82 percent of the returns in world equity markets with about 51 percent of the risk (volatility).

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While Wheaton’s endowed funds are managed to optimize risk-adjusted returns, the college also considers a broad array of Environmental, Social and Governance (ESG) factors in adopting, selecting, and regularly monitoring investment strategies and investment managers. In 2021, the Wheaton board made the decision to specifically allocate 10% of portfolio assets to managers with proactive ESG strategies.

Table 2

Endowment assets breakdown Equity (Total)

57.8%

Private Investments

8.5%

Real Assets

5.4%

Multi-Strategy

19.4%

Fixed Income

6.6%

Cash & equivalents

2.2%

The endowment management team The Board of Trustees delegates to the Investment Committee the day-to-day work of overseeing the endowment portfolio based on the objectives, policies and practices as outlined in the Board’s Investment Policy. The Investment Committee currently includes 12 trustees and three non-trustee members who are experienced professionals in the investment industry or in higher education. It typically meets six times per year.

Additionally, the committee collaborates with the college’s administrative finance team and with their investment advisors, LVW Advisors, which provides outsourced chief investment officer services including strategic counsel, research and implementation of manager selection and monitoring.

Looking to the future

“When I served as Chair of the Investment Committee, I saw how important the endowment is to not only sustain Wheaton’s excellence in the future, but to protect the college against inflation. A strong endowment helps Wheaton remain competitive and perpetuate the values and culture that we all admire and share. I would not have been able to attend Wheaton if it weren’t for the scholarship I received, and I feel proud to be able to give back to a close-knit community and well-managed institution like Wheaton.”

— Diane Nordin ‘80, Trustee Emerita

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Endowment Use at Wheaton Providing essential support

Wheaton College’s high-quality and flexible liberal arts education is possible with the support of the endowment. This support, which takes the form of an annual cash distribution to the operating budget of the college, provides an essential source of funding for Wheaton’s programs. Aside from tuition and fees, the endowment is the largest source of revenue underwriting annual operations.

Endowed funds directly impact the most essential aspects of a Wheaton education. Ninety-five percent of the college’s endowed funds are “restricted” to support a defined purpose identified by the donors when the endowed funds were established (Table 3). These restricted funds help to create a stable foundation for the college’s students and programs, now and for the future.

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The Louise Flaccus Reese ‘66 Endowed Scholarship Fund “All small colleges are facing difficult challenges. A growing endowment enables Wheaton to compete with the best liberal arts colleges in the future. Endowments are typically the hardest funds to raise, but they are crucial for the viability of Wheaton. The Wheaton endowment is the life blood of the institution.”

— Louise “Weezie” Flaccus Reese ‘66

Table 3

Purpose

Total Funds

Total Endowed Value-FY’22

Distribution

Scholarships, Fellowships & Internships

348

$120,340,281

$5,267,746

Faculty Chairs & Professorships

85

$50,587,698

$2,049,868

Academic Programs & Library

141

$22,208,987

$1,035,109

Facilities

21

$13,813,873

$627,0 65

Other (including athletics and equipment funds)

62

$28,684,610

$2,482,088

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Providing stability and building strength through flexibility The stability offered by the endowment can be particularly important in times of challenge.

Like many colleges and universities, Wheaton continues to experience the negative impacts of the pandemic in various ways, including additional costs and temporary revenue reductions. The strength and stability of the endowment allowed the Board to authorize a temporary increase in the spending rate of the endowment, from five to six percent in fiscal year 2021, to help offset the combined cost/revenue impact of the pandemic, to support the students, and to maintain the quality of a Wheaton education.

The spending rate returned to 5% in fiscal year 2022. The Board of Trustees approved a temporary increase in the spending rate to 5.75% in fiscal year 2023 to provide funding for strategic investments.

Beyond stability, the college’s endowed funds provide critical flexibility to navigate new situations and embrace new opportunities as they arise. Approximately 5 percent of the college’s endowed funds are unrestricted, meaning those

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Restricted and unrestricted funds Figure 3 5%

Total unrestricted endowment Total donor restricted endowment

95%

resources can be utilized where they are most needed, or to capitalize on emerging strategic opportunities that will strengthen the institution and enhance students’ educational experience. Future growth of the endowment will only add to the opportunity and flexibility that it brings to the college.

The White Family Endowed Scholarship Fund

“Starting in the early 1990s, my grandparents began to contribute significant gifts to educational institutions in Rhode Island. Our father, John Hazen White, Jr., extended the family passion for education with support to his alma mater as well as those of John III (Wheaton Class of 2010) and me. As a family, we recognize the value of education and believe in providing opportunity for anyone who wants to take advantage of a strong education. The White Family Endowed Scholarship is our small way of opening up doors.”

— Benjamin White ’12, Trustee (left), with his father, John Hazen White, Jr. (center) and his brother, John White III ’10.

Office of the President 26 E. Main Street Norton, Massachusetts 02766-2322 P: 508-286-8244

president@wheatoncollege.edu wheatoncollege.edu /WheatonCollege @wheaton WheatonCollege

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