Finances

This year was a year defined by growth in revenues, donations and endowment – and marked by investment in future growth
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As an independent, not-for-profit institution, INSEAD must generate income to sustain our continued academic excellence.

The main source of the school’s revenues is tuition, but we also rely on donations, the return on investment from our endowment and other activities, including commissioned research. This is why the Campaign for INSEAD is so important. The Campaign enables us to make strategic investments in the future of the school that would not otherwise be possible.

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Revenues saw strong performance across all areas in academic year 2017/2018. Highlights included the near-doubling of online revenues, up 48%, with an 8% growth in revenue from Customised Programmes. An increase in Executive MBA participant numbers led to a 9% rise in the programme’s annual revenues. Total revenues for the year reached €261M, an improvement of 7% on the previous year.

 

This year marked our second successive year of record philanthropic donations. This in turn boosted our endowment, the market value of which now stands at €239M. The strong growth of the endowment and support by our donors confirm it is our bedrock for long-term growth. Many of the core activities that contribute to our academic excellence, such as scholarships, research and teaching are enhanced with funding from the endowment. It is fundamental in achieving our mission. 

 

On the expenditure side, innovation and growth initiatives remain key areas for investment – online education, new faculty members and the Personal Leadership Development Programme of the revised MBA curriculum, to name just a few. The school’s significant spending on scholarships to complement the generosity of our donors is another strategic investment that brings huge returns in terms of the quality and diversity of our students.

Revenue and expenditure
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One large provision on the expenditure side this year came from two tax rulings by the French tax authorities. The first ruling resulted in a VAT adjustment for shorter Executive Education programmes. We are also no longer eligible to receive a research tax credit that we had claimed previously. The outcome is an accounting provision of €20.6M. This means that the overall financial results for the year show a one-time loss of €8.1M. INSEAD leadership is appealing these rulings and has taken steps to minimise tax risk going forward.

 

Based on revenue performance and growth projections, INSEAD launched two major capital investments in 2017/2018. The six-year transformation of the Europe Campus represents a renewal of commitment to our European roots, and we are putting down new roots by establishing a permanent space in San Francisco. Work is already well underway on this latest phase of the school’s global expansion and we will provide more information on these exciting initiatives throughout the coming year.

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Financial indicators

Column 1
In €000
Column 2
2018
Column 3
2017
Column 4
2016
Column 1
Total Income
Column 2
261,350
Column 3
254,414
Column 4
219,895
Column 1
Operating Cash Flow
Column 2
18,295
Column 3
16,422
Column 4
5,505
Column 1
Cash Flow from Endowment (transfer to operations)
Column 2
8,885
Column 3
8,187
Column 4
8,057
Column 1
Net cash flow from Financing
Column 2
(1,927)
Column 3
(2,852)
Column 4
3,623
Column 1
Net cash flow used in Investing
Column 2
(16,585)
Column 3
(10,436)
Column 4
(7,658)
Column 1
Interest paid
Column 2
(1,458)
Column 3
(1,574)
Column 4
(1,816)
Column 1
Changes in working Capital & exchange losses/gains
Column 2
15,429
Column 3
5,254
Column 4
7,044
Column 1
Cash Flow
Column 2
9,157
Column 3
14,932
Column 4
14,754
Column 1
Cash at year end
Column 2
91,718
Column 3
82,561
Column 4
67,629
Column 1
Endowment at beginning of the year
Column 2
212,544
Column 3
185,976
Column 4
189,660
Column 1
Donations received, net
Column 2
17,120
Column 3
16,426
Column 4
4,700
Column 1
Gains and losses from investment activities
Column 2
18,128
Column 3
18,329
Column 4
(327)
Column 1
Transfer to operations
Column 2
(8,885)
Column 3
(8,187)
Column 4
(8,057)
Column 1
Endowment at year end
Column 2
238,907
Column 3
212,544
Column 4
185,976
Column 1
Endowment performance rate
Column 2
8.4%
Column 3
9.5%
Column 4
-0.2%
Column 1
Spending rate
Column 2
4.2%
Column 3
4.2%
Column 4
4.5%
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INSEAD is a not-for-profit institution with entities in various countries. Therefore we are not required to publish consolidated accounts, but all our statutory accounts are audited. We maintain a governance structure that includes several committees of the Board of Directors responsible for Auditing, Finance and Risk, Endowment Management and Remuneration. These financial indicators are directly extracted from audited combined accounts based on IFRS accounting standards. Please note that financial indicators from previous years may change.

Endowment

Our endowment is a vital long-term investment that supports the school’s mission and builds competitive advantage
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A strong year for the endowment is a strong year for INSEAD.

The INSEAD endowment has had another strong year. The 4% to 4.5%, long-term annual spending rate allows the school to plan for and invest in faculty chairs, research projects, programmes, scholarships and facilities. Thanks to both the generosity of donors and the performance of our investment strategy, the total value increased by €26.5M to €239M this year. During this period, the INSEAD investment portfolio returned 9.6%, outperforming its benchmark by 1.7%.

 

As of August 2018, INSEAD’s endowment is comprised of a €233.8M investment portfolio and a further €5.2M in directly held property, cash and other assets. While the Endowment Management Committee of the Board is responsible for the endowment, experts from Partners Capital – our advisers since 2007 – manage the investment portfolio on our behalf.

 

I have served on the Endowment Management Committee since 2011 and stepped up to chair the Committee in 2016. I am honoured to serve the school and its stakeholders in this role. I thank all donors for their kind contributions, which are pivotal to the INSEAD endowment growth. This, in turn, is of paramount importance to the school’s future success.

 

Mirjam Staub-Bisang MBA'99J

Endowment Management Committee Chair

 

Mirjam Staub-Bisang
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INSEAD Endowment Performance – Academic Year Total

INSEAD endowment and investment portfolio performance – academic year performance (August 2008 - August 2018)
Figure 1 - See notes at bottom of page
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Investment strategy

The endowment remains broadly diversified across both traditional and alternative asset classes, including equities, corporate credit, hedge funds and private market strategies. Our investment strategy has several tenets:

 

  • Relatively high equity risk level given the school’s long-term time horizon
  • Diversification across multiple asset classes including meaningful allocations to private markets where the potential for outperformance is greatest
  • Selection of the most skilled asset managers within each asset class
  • Consideration of environmental, social and governance issues, widely known as ESG principles, in the investment decision making process

 

The portfolio has 29% allocated to private market strategies, including private equity, real estate and private debt. This percentage has increased over the last five years based on our belief that it will continue to generate an illiquidity premium of around 3% to 5% compared to public markets. The private markets portfolio is well diversified, ranging from venture capital investments in early-stage technology companies, European real-estate investments and private-equity investments in middle-market US firms. This portfolio was the key driver of the endowment’s returns in 2017/2018. In aggregate, the private market portfolio returned +19% in the year, led by the private equity portfolio, which was up +23%.

 

The portfolio has a 49% allocation to public equities, which, along with the private market portfolio, is the portfolio’s key return-generating allocation over the long term. The public equity portfolio consists of a

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combination of long-only and long-short actively managed mandates, which invest in stocks based on fundamental analysis of the underlying companies, and passive index trackers to express tactical geographical positioning. The long-short equity portfolio performed particularly strongly in 2017/2018, generating a 9% return, which was broadly in line with global equity markets despite the managers taking around 50% of the risk. This outperformance was driven predominately by sector-specialist managers in healthcare and technology, whose deep knowledge of their chosen industries provided insights into portfolio companies.

 

The remainder of the portfolio is predominately invested in inflation-linked government bonds that protect the fund from unexpected rises in inflation and a diversified suite of absolute-return hedge-fund strategies, which aim to generate returns with minimal correlation to traditional asset classes.

 
Long-term performance

 

From August 2008 to the end of August 2018, the investment portfolio returned positive growth of +65.8% cumulatively after deduction of all fees and expenses. This represents +12.7% cumulative outperformance of the INSEAD Composite Benchmark, a custom measure adopted by the Endowment Management Committee.

 

Our endowment still has a long way to go before it matches the comparable funds of our leading competitors. However, 60 years ago there was no INSEAD, let alone an endowment. In this light, the size of the INSEAD endowment is very impressive indeed. We look forward to the Campaign taking it to even greater heights.

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Endowment Portfolio Assets – Academic Year Total

Total assets of the endowment portfolio (August 2003 - August 2018)
Figure 2 - See notes at bottom of page
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Figure Notes

Figure 1:
1 The academic year starts on 1 September and finishes on 31 August. This is reflected in the table above. For example, the year labelled 2018 reflects performance from 1 September 2017 to 31 August 2018.
2 INSEAD Investment Portfolio consists of the portfolio managed by Partners Capital.
3 The INSEAD Endowment consists of the portfolio managed by Partners Capital and all other assets including direct property, cash and other assets.
4 The INSEAD Composite Benchmark is a custom benchmark comprised of asset class indices (e.g. MSCI World NR 100% Hedged to EUR for the equity allocation or State Street Private Equity Index for the private equity allocation) and weighted to reflect the long-term strategic asset allocation adopted by the committee.


Figure 2:
Total endowment portfolio assets include donations.

Download

Annual Report Description
We are pleased to provide downloadable versions of Our Year in Review 2017/2018. These downloads include a single page format ('Print'), a booklet format ('Screen') and pullouts of our Finances and Special Features chapters. All downloads are provided as a PDF file.