Finances & Endowment
Explore our financial health and foundation to build on
Revenues – and consequently revenue projections – rose steeply in the first half of the year. Executive Education, particularly Customised Programmes, was the star performer, as our corporate partners showed their enthusiasm for recapturing that irreplaceable INSEAD campus experience. By August 2022, Executive Education revenues were 60% up on the previous year.
We also significantly exceeded our original overall financial targets and surpassed even our most upbeat expectations, particularly with respect to the Executive MBA. The final total revenue count of €284M was up by around 30% on the previous year – even higher than before the pandemic – and there was a return to surplus of €13M.
This positive result is all the more remarkable, given the increased expenses entailed by returning to business as usual, ending costsaving activities and supporting renewed growth. Hiring freezes came to an end, resulting in new recruitment. Travel between campuses and for business development increased, resulting in increased expenses. And suspended projects, such as the Europe Campus Renewal resumed, resulting in the need to recommence spending on them.
However, much of the new or resumed expenditure in 2021/2022 represented a new and optimistic spirit of investment in the future. A key example is the purchase of the neighbouring CEDEP building in Fontainebleau. As well as providing much-needed new space, this move also reflects a reinvigorated strategic partnership with many new opportunities. Similarly, our investments in green initiatives in Singapore, led by Campus Services and the Hoffman Global Institute for Business and Society helped set an example of how business can be a force for good.
We closed the year still optimistic, but guardedly so. As inflation and energy shortages beset the world economy, concerns about climate change and geopolitical instability remained acute. 2022/2023 no longer looked as though it would be a year of return to normal. However, with our community reunited in spirit – a spirit made stronger than ever by the pandemic – and physically together once again, we are poised to weather any storm and reach new levels of prosperity.
INSEAD is a not-for-profit institution with entities in various countries. Therefore, we are not required to publish consolidated accounts; however, all our statutory accounts are audited. We maintain a governance structure that includes several committees of the Board responsible for Audit, Finance and Risk; Endowment Management; and Remuneration. These financial indicators are directly extracted from audited combined accounts based on International Financial Reporting Standards (IFRS).
Both equities and bonds have suffered severe and simultaneous corrections driven by the increase in interest rates. Over the course of the last academic year, global equities were down -12.2% while government bonds were down -15.3%.
The inflationary outlook is still uncertain, specifically with respect to the terminal interest rates and the degree of economic slowdown required to reduce core inflation in line with long-term central bank targets. Accordingly, an unusually wide range of economic and market outcomes is possible in the coming 12–18 months, further clouded by China’s Covid-19 policies and the ongoing war in Ukraine.
In this context, the investment portfolio was resilient in 2021/2022. The portfolio returned +1.1% in Euro terms, while the composite benchmark was down -5.6% and a 70/30 equity/bond index1 was down -13.0%. The key contributors to this outperformance were the allocation to the US dollar (which appreciated 18% against the Euro in the academic year), the portfolio of private market investments (which were up +17.0% in the period) and the absolute return strategies (hedge fund strategies designed to have a minimal correlation to traditional asset classes, which were up +4.6%). The portfolio’s tactical allocation to gold also proved defensive at the outset of the war in Ukraine. This performance followed a record-breaking +28.3% return in 2020/2021, and an annualised performance over the last three years of +11.2%, almost 4% ahead of the investment portfolio benchmark.
With Covid-19 restrictions gradually lifted in Europe and Asia, the school’s financial situation has improved. As a result, the INSEAD Endowment’s spending rate in support of the school was reduced to 5.0% – down from the 5.5% which was granted on an exceptional basis at the height of the pandemic.
The Sustainable Investments Sub-committee, led by Professor Lucie Tepla, continued to refine the ways in which environmental, social and governance factors are integrated into the investment process and presided over a number of new investments, particularly focused on the energy transition.
I would like to thank the members of the Endowment Management Committee for their guidance, insights and commitment, which were particularly important in these challenging markets.
I would also like to thank the INSEAD Executive team, who have successfully steered the institution through exceptionally difficult circumstances. Last but not least, I would like to extend deep gratitude to our donors for their generosity and their trust.
In a world troubled by increasing geopolitical tensions, INSEAD’s role of bringing together people, cultures and ideas from around the globe is all the more important. At the same time, a troubled world is a testing context for an Endowment that sustains the school over the long term. A strong Endowment, thanks to the generosity of our donors and a solid financial performance, will act as an anchor of long-term stability for INSEAD.
The Endowment’s investment strategy remains focused on maximising long-term risk-adjusted returns while integrating environmental, social and governance (ESG) factors into decision-making.
The portfolio has a 40% allocation to private markets, including private equity, real estate, and private debt. This allocation has increased in order to capture the illiquidity premium of around +3% to +5% that private markets typically offer. The private markets portfolio is well diversified, including venture capital investments in early-stage technology companies, private equity investments in lower middle-market businesses, European real estate investments, and bilaterally negotiated senior loans to privately owned businesses. Over the course of the year, we have continued to ramp up our private investments, with new commitments focused on private debt (given what we believe to be significantly improved risk-adjusted returns following rate increases) and buyout managers focused on “complex” situations.
There is a further 39% allocation to public equities, which, along with the private market portfolio, represents our core long-term, return-generating asset class. The public equity portfolio consists of a combination of long-only and long-short actively managed funds as well as passive index trackers.
Following the increase in yields and in an attempt to diversify the sources of returns away from the equity markets, the portfolio has also increased its liquid credit portfolio. In combination with the private debt portfolio, the endowment now has a 13% allocation to credit.
The remainder of the portfolio is predominantly invested in a diversified portfolio of absolutereturn hedge fund strategies, which aim to generate returns with minimal correlation to traditional asset classes, and inflation-linked government bonds, protecting the endowment from unexpected rises in inflation.
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 would like to thank Partners Capital for their support in ensuring the long-term growth of the Endowment’s Investment Portfolio.