Annual CIO Report

Report of the Chief Investment Officer

November 2024

Wellesley’s endowment is the keystone of the College’s financial strength, providing approximately 45% of operating revenue. The Long-term Investment Pool had an investment return of 7.8% in Fiscal 2024. Endowment spending, investment performance and gifts took the June 30, 2024 value of the pool to $2.982 billion.

Fiscal Year 2024 Developments

Public equity markets led returns in Fiscal 2024. Returns to long-term alternatives were mixed, with most strategies posting low-to-mid single-digit returns while real estate returns were negative. Treasury bond returns were negative.

¹Long Term Alternatives are measured against the Cambridge Associates Private Equity, Growth Equity,
Venture Capital, Distressed, Natural Resources and Real Estate indices.
²Semi-marketable investments include strategies focused on absolute return.

Longer-Term Results

The endowment’s investment returns are strong compared to a variety of common yardsticks.

• The College’s well-diversified portfolio has exceeded a hypothetical portfolio of 65 percent stocks and 35 percent bonds over the last 5, 10 and 15 years.
• The Policy Portfolio benchmark is a measure of how the College’s target asset allocation would perform if returns in every asset class matched the market. The difference between the portfolio and the benchmark is a measure of the value added by the Investment Office and the College’s investment managers. Long-term investment returns have consistently exceeded the Policy Portfolio benchmark.
• Another yardstick is performance versus peers. Wellesley continues to rank in the top quartile in a universe of institutions with investments pools larger than $1 billion over the past 5, 10, and 15 years.

³A commonly used measure of portfolio performance is a comparison with a passive portfolio. We use a blend of 65 percent stocks (as measured by the MSCI ACWI) and 35 percent bonds (as measured by the Citigroup World Gov’t Bond Index).

Fossil Fuel Exposure

On June 30, 2024, the portfolio’s exposure to fossil fuels was 3.2%, down from 3.4% a year earlier. During FY24, the value of the portfolio’s fossil fuel exposure decreased to $94.0 million from $96.6 million the prior year. No new commitments to private equity oil and gas funds have been made since 2017.

Policy Portfolio and Strategy Going Forward

The objective of the investment portfolio is to support the College in real terms over the long term. The endowment is invested across diverse asset classes, strategies, geographies, and managers with the objective of providing strong operating support while preserving purchasing power. The Policy Portfolio, established by the Wellesley College Investment Committee, guides asset allocation. The Investment Committee and Investment Office team regularly review the expectations upon which the Policy Portfolio is based, with the goal of refining target allocations and improving the portfolio’s risk and return characteristics. The table below compares the Policy Portfolio and the actual asset allocation on June 30, 2024. The portfolio has sufficient exposure to liquid investments to maintain the endowment’s financial support of the College’s operations and to provide for the liquidity needs of the portfolio.

In executing the investment strategy, the Investment Office team aims to add value within asset classes through long-term partnerships with strong performing, highly ethical investment managers. Across the portfolio, our managers must have an uncompromising focus on integrity, which not only ensures alignment with the College’s values, but protects long-term returns as these managers put client interests first. In addition, we look for managers with a sustainable investment “edge.” Typical characteristics of Wellesley managers include: long investment horizons; a bias toward fundamental, bottom-up investing; a focus on valuation; relatively concentrated portfolios that often show little relationship to benchmarks; and strong organizations. The Investment Office and the Investment Committee remain focused on long-term growth to ensure that the endowment continues to support the College’s mission.

I believe that the College will be well served by its strategy of broad diversification across asset classes, geographies, and strategies, and by the excellent investment managers with whom we partner. Members of the College community with questions, suggestions, or thoughts about the management of the Wellesley College endowment are invited to contact me at any time.

Deborah F. Kuenstner

Chief Investment Officer