Financial Performance

Agility and resilience thanks to a unique business model.
Widgets
Content

As a truly global business school with no parent university, INSEAD has a unique business model. In 2020/2021, this enabled us to act with financial agility, flexibility and resilience. As a result, we are emerging from the crisis in a strong position.

 

There is no denying that Covid-19 has continued to have a major impact on INSEAD finances. As waves of the pandemic continued to cripple the world, ongoing restrictions, especially in Asia, delayed the financial recovery that we had initially hoped for. It will come as no surprise to our community that we finished 2020/2021 with another negative overall result and total revenues still 22% down on pre-pandemic levels.

 

The challenges continue, but many positives have emerged as the crisis abates. For example, revenues from Degree Programmes rose sharply over the course of the year, exceeding forecasts. This vindicates our long-term strategy of balancing income from Executive Education – which tends to thrive in times of economic prosperity – and Degree Programmes, which tends to become more popular during downturns.

 

Another positive is that fundraising income exceeded expectations in 2020/2021, again justifying our long-term investment in this component of our financial model and underlining the success and importance of our current campaign: A Force for Good.

 

Our healthy cash reserves and endowment income, both the result of careful financial management, have also proved major assets as our sector proceeds along the bumpy road to recovery. In particular, our long-term commitment to building a significant endowment paid off, as we were able to request a one-off increase in annual support from our supporting Foundations in 2020/2021 – up from the usual 4.2% to 7.1%.

 

Likewise, the investments of previous years have yielded significant returns, notably our GO-Live technology and Online Programmes. Both gave a much-needed revenue boost to Executive Education at a time when companies could not commit to sending participants to INSEAD campuses.

 

Fortunately, too, there were significant savings on expenditure associated with travel and events throughout the academic year. In addition, the cost-saving measures introduced during the previous year, such as hiring and salary freezes, along with the continued rollout of new, streamlined procurement processes, mean that our financial situation in 2020/2021 is far, far better than it might have been.

 

Looking to the future, we are upbeat, as Executive Education participants begin to return to campus and our Degree Programmes maintain a strong position in the market. We have already repaid around a quarter of our entire special pandemic-related loans, and the restrictions on recruitment and salaries imposed during the pandemic have now been lifted. As befits a world emerging from crisis, our forecasts remain conservative, but our unique business model and long-term strategy will help us seize the opportunities that will take us to a brighter global future.

Total Revenue in 2020/2021
Total Revenue in 2020/2021

Financial Indicators

Content

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 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.

Column 1
In €’000
Column 2
2021
Column 3
2020
Column 4
2019
Column 1
Total Income
Column 2
217,727
Column 3
235,566
Column 4
278,955
Column 1
Operating Cash Flow
Column 2
(9,896)
Column 3
(10,025)
Column 4
6,508
Column 1
Cash Flow from Endowment (transfer to operations)
Column 2
21,029
Column 3
11,733
Column 4
10,594
Column 1
Net Cash Flow from Financing
Column 2
(11,480)
Column 3
40,668
Column 4
(15,454)
Column 1
Net Cash Flow Used in Investing
Column 2
(4,075)
Column 3
(13,248)
Column 4
(12,675)
Column 1
Interest Paid
Column 2
(630)
Column 3
(659)
Column 4
(1,092)
Column 1
Changes in Working Capital & Exchange Losses/Gains
Column 2
21,290
Column 3
5,095
Column 4
9,834
Column 1
Cash Flow
Column 2
16,238
Column 3
33,565
Column 4
(2,284)
Column 1
Cash at year end
Column 2
139,237
Column 3
122,999
Column 4
89,434
Column 1
Endowment at beginning of the year
Column 2
281,559
Column 3
254,931
Column 4
238,907
Column 1
Donations received, net
Column 2
16,662
Column 3
21,458
Column 4
15,010
Column 1
Gains and losses from investment activities
Column 2
74,172
Column 3
16,903
Column 4
11,607
Column 1
Transfer to operations
Column 2
(21,029)
Column 3
(11,733)
Column 4
(10,594)
Column 1
Endowment at year end
Column 2
351,364
Column 3
281,559
Column 4
238,907
Column 1
Endowment performance rate
Column 2
26.1%
Column 3
6.4%
Column 4
4.8%
Column 1
Spending rate
Column 2
7.1%
Column 3
4.5%
Column 4
4.5%

Endowment

Record-breaking returns from buoyant financial markets.
Widgets
Content

For the second consecutive year, the Covid-19 crisis has marked the global economy, radically altering the macroeconomic environment – within which the INSEAD Endowment invests – and contributing to recordbreaking returns.

 

By the end of the academic year 2020/2021, the US and Europe had managed to reopen their economies – thanks to active vaccination campaigns – although many emerging economies were lagging in their response. As a result, the effects of the crisis remained quite visible, affecting international travel and causing disruptions to global supply chains.

 

Following the slump in GDP growth the previous year, 2021 saw a return to growth, accelerated by increased household savings and continued supportive monetary and fiscal policies of historic proportions. As a result, global equities rose by 28.2% over the course of 2020/2021, buoyed by strong liquidity flows. Worryingly, however, inflationary pressures started accumulating as a result of increased demand, disrupted supply, and higher commodity prices. By the end of our reporting period, the future course of central bank policies in the US and the EU had become uncertain, which in turn led to increased volatility in government bond markets.

 

The INSEAD Endowment returns for the academic year were in line with global equities, despite taking only two-thirds of the global market risk. Thanks to its private equity portfolio (which returned +69%), some tactical reallocations at the height of the pandemic, and overweight allocations to the technology and biotechnology sectors, the INSEAD Endowment posted its highest returns ever in 2020/2021: +28.3% in EUR terms and +28.1% in local currency terms.

 

The school, on the other hand, continued to be significantly impacted by the economic downturn and government-imposed restrictions on mobility and social interaction. The Endowment Management Committee therefore supported a request to increase the Endowment annual financial support of the school’s operating budget, on an exceptional basis, from 4.2% to 7.1% for 2020/2021.

 

At the same time, there was no compromise to our policy of investing responsibly. The ESG sub-committee, led by Professor Lucie Tepla, continued to refine our environmental, social and governance (ESG) investing framework. As a result, the Endowment made several new investments, particularly in global equity managers that reflect our own principles.

Content

I would like to extend my deep appreciation and thanks to the members of the Endowment Management Committee for their time, valuable insights and dedication; and to the administration of the school, who managed the institution exceptionally well during these challenging times. Last but not least, I would like to extend my deep gratitude to all our donors for their generosity and their trust. Your contributions are all the more important during these times of financial uncertainty for our school. As the Business School for the World, built around multiple campuses and bringing together people, cultures and ideas from across the globe, INSEAD has faced enormous challenges during the Covid-19 crisis. The school’s success, against the odds, should make us all proud to be part of the INSEAD family.

 

Alexis Habib
MBA’81
Endowment Management
Committee Chair

Alexis Habib
Alexis Habib MBA’81, Endowment Management Committee Chair

Our investment strategy

Content

The endowment’s investment strategy remains focused on maximising long-term riskadjusted returns while integrating environmental, social and governance (ESG) factors into decision making.

 

  • We take relatively high levels of equity exposure, given our longterm 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 aim to select the most skilled asset managers within each asset class.
  • We invest sustainably by applying ESG principles in our decisionmaking process.

 

At the time of writing, 35% of the portfolio is allocated 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 typically offer. The private-markets portfolio is well diversified, including venture capital investments in early-stage technology companies, privateequity investments in lower middle-market businesses, European real estate investments and bilaterally negotiated senior loans to privately owned businesses. Over the course of 2020/2021, we continued our ramp-up of private investments, with five new commitments to private-equity sector specialists and venture capital funds.

 

There is a further 46% 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. The active portfolio is skewed towards sector-specialist managers, particularly those focused on technology and biotechnology. We believe that the deep domain knowledge of these experts will generate differentiated insights into the underlying companies and thus bring high returns. We typically allocate to those sectors characterised by high barriers to entry – for example, the scientific understanding required for biotechnology investing – and those with high dispersion in financial outcomes between companies, a tactic that improves the potential return on successful stock selection. Over the course of the year, the endowment has increased its allocation to managers with ESG integration within their investment process, for an amount representing approximately 74% of our portfolio.

 

The remaining 19% of the overall portfolio is predominantly invested in a diversified selection of absolute-return hedge fund strategies, which are designed to generate returns with minimal correlation to traditional asset classes, and inflation-linked government bonds and gold, 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 INSEAD Endowment.

Title

INSEAD Investment Portfolio Performance

INSEAD Investment Portfolio Performance Table
Content

Thanks to the generosity of our donors and the performance of our investments, the total value of the endowment increased to €355 million as of August 2021. The investment portfolio, in EUR terms, returned +28.3% in the academic year 2021 and +12.4% per annum over the last three years.

Title

Total Assets of Endowment Portfolio

Bar graph Endowment Portfolio
Notes
1 The INSEAD investment portfolio consists of the portfolio managed by Partners Capital.
2 The INSEAD Composite Benchmark is a custom benchmark comprising 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.
3 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.