Finances

Rising revenues enable investment in INSEAD’s future
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As an independent, non-profit institution, INSEAD must forge its own future by generating income from tuition and other sources, including donations and return on endowed funds. 

 

In many ways our participants and supporters have always been our “shareholders”. By choosing INSEAD, they make a vital investment not just in their own careers but in the success of the school.

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Now, more than ever before, our investors are also stakeholders in the creation of a better world. This fact was underlined in academic year 2018/2019 by the launch of the Campaign for INSEAD: A Force for Good. The Campaign reaffirmed the school’s commitment to business as a driver of sustainability and societal benefit. Over the course of the year, we advanced steadily towards the ambitious target of €250 million. By the end of August 2019, less than 12 months into this public phase of the Campaign, we had received €175 million in gifts and pledges.

 

Meanwhile, overall revenues continued to rise to an all-time high of €280 million – up by 7% on the previous year. It was a particularly outstanding year for Executive Education, with 17% growth in revenues from Customised Programmes in Europe a highlight of more than 10% revenue growth across all regions. 

 

Thanks to increased revenue INSEAD has been able to increase spending on strategic priorities – exceptional faculty recruitment and investment in new programmes, both of which promise great returns over the years to come. In addition, we continued to make significant investments in scholarships and other strategic moves, such as digital transformation, the San Francisco Hub for Business Innovation and Europe Campus Renewal. 

 

The good news is that INSEAD returned to surplus after last year, when two French tax rulings went against us. In academic year 2018/2019, we will post an end-of-year surplus totalling €2.2 million.

Finances
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Financial indicators

Column 1
In €000
Column 2
2019
Column 3
2018
Column 4
2017
Column 1
Total Income
Column 2
279,626
Column 3
261,350
Column 4
254,414
Column 1
Operating Cash Flow
Column 2
10,707
Column 3
18,295
Column 4
16,422
Column 1
Cash Flow from Endowment (transfer to operations)
Column 2
10,594
Column 3
8,885
Column 4
8,187
Column 1
Net cash flow from Financing
Column 2
(15,454)
Column 3
(1,927)
Column 4
(2,852)
Column 1
Net cash flow used in Investing
Column 2
(12,675)
Column 3
(16,585)
Column 4
(10,436)
Column 1
Interest paid
Column 2
(1,092)
Column 3
(1,458)
Column 4
(1,574)
Column 1
Changes in working Capital & exchange losses/gains
Column 2
5,636
Column 3
15,429
Column 4
5,254
Column 1
Cash Flow
Column 2
(2,284)
Column 3
(9,157)
Column 4
(14,932)
Column 1
Cash at year end
Column 2
89,434
Column 3
91,718
Column 4
82,561
Column 1
Endowment at beginning of the year
Column 2
238,907
Column 3
212,544
Column 4
185,976
Column 1
Donations received, net
Column 2
15,010
Column 3
17,120
Column 4
16,426
Column 1
Gains and losses from investment activities
Column 2
11,607
Column 3
18,128
Column 4
18,329
Column 1
Transfer to operations
Column 2
(10,594)
Column 3
(8,885)
Column 4
(8,187)
Column 1
Endowment at year end
Column 2
254,931
Column 3
238,907
Column 4
212,544
Column 1
Endowment performance rate
Column 2
4.8%
Column 3
8.4%
Column 4
9.5%
Column 1
Spending rate
Column 2
4.5%
Column 3
4.2%
Column 4
4.2%
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Finally, the finance department itself became more streamlined and agile, evolving from local teams overseen by local managers and a global CFO to a fully global team spread across Europe, Asia and the Middle East. Restructuring designed in academic year 2018/2019 is nearing completion, as is the move to a new procurement and invoicing system. These changes promise further cost savings and better customer service tomorrow.

Endowment

A vital source of support and stability in a changing world
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In academic year 2018/2019, the INSEAD endowment saw another strong performance, despite a period of higher market volatility. 

I was asked to chair the Endowment Management Committee in January 2019, succeeding Mirjam Staub-Bisang MBA’99J who did a superb job at steering the endowment for three years and served on the committee for over seven years. I cannot thank Mirjam enough for her leadership and her many critical contributions to the endowment.

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As the Endowment Management Committee looks ahead, we recognise today’s challenges. The world is going through a period of heightened uncertainty, ranging from global social unrest to trade tensions, as well as historically low or even negative interest rates. In addition, in our mission to grow the endowment we acknowledge the critical importance of doing so in a sustainable manner.

 

To those ends, we have further strengthened the Endowment Management Committee this year by adding new members to our experienced team of financial-sector experts and by creating a sub-committee to develop and continuously upgrade our ESG integration led by Professor Lucie Tepla.

 

I would like to thank the members of the Endowment Management Committee for their dedication. Above all, I would like to thank all our donors for their trust in our work. It is thanks to their amazing support that the endowment plays such a pivotal role in INSEAD’s achievements as the Business School for the World and continuing quest to be a global force for good.

 

Alexis Habib MBA’81

Endowment Management Committee Chair

 

Endowment
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Performance by academic year (September 2009–August 2019)

INSEAD endowment and investment portfolio performance – academic year performance (September 2009–August 2019)
Figure 1 - See notes at bottom of page
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Thanks to both the generosity of our donors and the performance of our investments, the total value of the endowment increased to €255 million this year. 

 

This figure is comprised of €256 million in the investment portfolio, plus a further €9 million in directly held property, cash and other assets, and minus €10 million to be distributed from the endowment to the school. The investment portfolio returned +4.3% in the period against +0.8% for global public equity markets1. This significant outperformance was driven by the private markets component of the portfolio, which was up by +15% in the year.    

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Investment strategy
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The endowment’s investment strategy focuses on high long-term returns, while striving to follow best market principles in environmental, social and governance, or ESG, issues:

 

  • We take relatively high levels of equity exposure, as we have a long-term time horizon
  • We are diversified across multiple asset classes, including a meaningful allocation to private markets, where we believe that the potential for outperformance is greatest
  • We select the most skilled asset managers within each asset class
  • We invest sustainably, by applying ESG principles in our decision-making process.

 

The portfolio has a 33% allocation to private markets, including private equity, real estate and private debt. This allocation has increased over the last five years in order to capture the illiquidity premium of around 3% to 5% that private markets offer. The private-markets portfolio is well diversified, including venture capital investments in early-stage technology companies, European real estate investments, private equity investments in lower middle-market businesses and bilaterally negotiated senior loans to privately owned businesses. 

 

There is a further 47% allocation to public equities, which, along with the private-market portfolio, represents our core long-term, return-generating asset class. 

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The public equity portfolio consists of a combination of long-only and long-short actively managed funds as well as passive index trackers, in order to capture both bottom-up fundamental investment opportunities and tactical allocations. This year, our long-short equity portfolio performed well, generating a +2.2% return compared to +0.8% for global public equity markets. 

 

The remaining 20% of the portfolio is predominantly invested in a diversified suite of absolute-return hedge fund strategies, which aim to generate returns with minimal correlation to traditional asset classes, and inflation-linked government bonds and gold, protecting the fund from unexpected rises in inflation.

 

Ten-year performance 

 

From September 2009 to the end of August 2019, the investment portfolio returned +102.3% cumulatively after deduction of all fees and expenses. This represents a +14.1% cumulative outperformance of the INSEAD Composite Benchmark, a custom measure adopted by the Endowment Management Committee.

 

While the Endowment Management Committee is directly responsible for the endowment, experts from Partners Capital – our advisers since 2007 – manage the investment portfolio on our behalf. We want to thank Partners Capital for their support in ensuring the long-term growth of the INSEAD endowment.

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Endowment Portfolio Assets – Academic Year Total

Endowment Portfolio Assets – Academic Year Total
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. This is reflected in the table above. For example, the year labelled 2019 reflects performance from 1 September 2018 to 31 August 2019.
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 2018/2019 and annual reports from previous years. All downloads are available in the PDF file format.