Annual CIO Report

Report of the Chief Investment Officer

November 2021

Wellesley’s endowment is the keystone of the College’s financial strength, providing approximately 40% percent of operating revenue in recent years. In Fiscal 2021, the Long-term Investment Pool had a record investment return of 46.5%. Investment performance drove the June 30, 2021 value of the pool to $3.226 billion, an increase of $958 million from the prior year. After such a financially challenging year, this is a remarkable result.


Fiscal Year 2021 Developments

Fueled by accommodative fiscal and monetary policy and the roll-out of COVID-19 vaccines, the rebound in risk assets that began in the second quarter of 2020 continued through FY21. Equity markets were buoyed by a turnaround in earnings, and real assets benefited from supply-demand imbalances as economies recovered. Bonds suffered as yields rose in anticipation of improved economic activity, and short-term interest rates remained depressed. Against this backdrop, venture and growth equity strategies delivered extraordinary returns.

The exceptional FY21 return benefited from the fact that in making commitments to long-term alternatives the Investment Team has long found venture and growth opportunities more attractive than other strategies. As a result, the portfolio enjoys significant, mature exposure to venture and growth. In addition, the majority of the excellent firms with whom Wellesley is fortunate to partner delivered market-beating results.

Total Return by Asset Class Year Ended June 30, 2021

Asset Class

Wellesley Return

Market Return

Benchmark/Comparative Index

Public Equity



Public Equity Blended Benchmark (1)

Long Term Alternatives



Cambridge Associates Blended Benchmark (2)

Semi-marketable (3)



HFRI Fund of Funds Composite Index

Fixed Income



Fixed Income Benchmark (4)

Cash & Equivalents



Citigroup Three-Month T-Bill

Total Portfolio



1Public Equity Blended Benchmark is a weighted average of MSCI ACWI, MSCI EAFE, MSCI EM and Russell 3000.

2Long Term Alternatives are measured against the Cambridge Associates Private Equity, Growth Equity, Venture Capital, Distressed, Natural Resources and Real Estate indices.

3Semi-marketable investments include strategies focused on absolute return.

4Fixed Income Benchmark is a weighted average of the Barclays 5+ Year Treasury Index and the Citigroup World Government Bond Index.

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. 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 1, 3, 5 and 10 years.
Total Annualized Return on Endowment, Year Ended June 30, 2021

5 Years

10 Years

15 Years

Wellesley Portfolio




65/35 Stock/Bond Portfolio(6)




Policy Portfolio Benchmark




6A 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, 2021, the portfolio’s exposure to fossil fuels was 2.9%, down from 3.7% a year earlier. During FY21, the value of the portfolio’s fossil fuel exposure increased to $94.5 million from $84.7 million the year before as the value of private equity oil and gas interests recovered. Despite this increase, exposure as a percent of the portfolio fell as managers’ holding of public equity declined and other parts of the portfolio outperformed energy. No new commitments to private equity oil and gas funds have been made since 2017.

Fossil Fuels Exposure
June 30, 2021
  % of WCIO NAV $ in millions
  FYE 2020 FYE 2021 Difference FYE 2020 FYE 2021 Difference
Private 2.30% 2.10% -0.20% 52.70% $69.20 $16.60
Public 1.40% 0.80% -0.60% $32.00 $25.20 -$6.80
Total 3.70% 2.90% -0.80% $84.70 $94.50 $9.80

Policy Portfolio and Strategy Going Forward

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, 2021. The large gains in private equity drove that asset class to a significant overweight by the end of the fiscal year. 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.


Asset Allocation as of June 30, 2021

Asset Class

Policy Portfolio

Asset Allocation

Public Equities



Long Term Alternatives






Total Alternative Assets



Fixed Income and Cash



Total 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 includes; 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