Financial Performance

Reunited on campus for revenue growth and renewed investment in the future

Thanks to INSEAD’s organisational agility and careful financial management during the Covid-19 years, we welcomed our community back to a school in a financially secure position.

 

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.

Total Revenue in 2021/2022
Total Revenue in 2021/2022

Financial Indicators

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).

In €’000
2022
2021
2020
Total Income
284,474
217,727
235,566
Operating Cash Flow
5,221
(9,896)
(10,025)
Cash Flow from Endowment (transfer to operations)
16,190
21,029
11,733
Net Cash Flow from Financing
914
(11,480)
40,668
Net Cash Flow Used in Investing
(15,753)
(4,075)
(13,248)
Interest Paid
(796)
(630)
(659)
Changes in Working Capital & Exchange Losses/Gains
5,317
21,290
5,095
Cash Flow
11,093
16,238
33,565
Cash at year end
150,330
139,237
122,999
Endowment at beginning of the year
351,364
281,559
254,931
Donations received, net
24,496
16,662
21,458
Gains and losses from investment activities
10,309
74,172
16,903
Transfer to operations
(16,190)
(21,029)
(11,733)
Endowment at year end
369,979
351,364
281,559
Endowment performance rate
2.9%
26.1%
6.4%
Spending rate
5.0%
7.1%
4.5%

Endowment

A resilient portfolio in a challenging market environment

After several years of strong market conditions, 2021/2022 saw a particularly challenging market environment. Headline inflation in the United States peaked at 9.3%, a level not seen since 1981, owing to pressures on supply chains following the Covid-19 shutdowns and higher energy prices as a result of the war in Ukraine. And whilst these inflationary factors have started to moderate, core inflation has remained high due to more persistent components, including wages and living costs. In response, central banks have orchestrated a synchronised and dramatic increase in the interest rates of higher-income countries, which has slowed economic growth and significantly reduced valuations across most financial markets.

 

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.

 

Alexis Habib
MBA’81
Endowment Management
Committee Chair

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

Our investment strategy

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.

 

  • We take relatively high levels of equity exposure, given our 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 most significant.
  • We aim to select the most skilled asset managers within each asset class.
  • We invest sustainably by integrating material environmental, social and governance factors into our 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.

INSEAD Investment Portfolio Performance in Recent Years

INSEAD Investment Portfolio Performance in Recent Years

Total Assets of Endowment Portfolio (August 2005 – August 2022)

Total Assets of Endowment Portfolio (August 2003 – August 2022)
Notes
1 The Endowment Portfolio is composed of the Investment Portfolio managed by Partners Capital, and other assets directly held. The Investment Portfolio represents the majority of the assets of the Endowment (above 95%). Differences among the performances of the Investment and Endowment Portfolios are due to timing differences and the performance of the assets directly held. Over the long term, the performance of the Investment Portfolio and the Endowment Portfolio are expected to be similar.
2 The INSEAD investment portfolio consists of the portfolio managed by Partners Capital.
3 The INSEAD Composite Benchmark is a custom benchmark comprised of asset class indices (e.g. MSCI World NR 100% Hedged to Euro 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.
4 Total endowment portfolio assets include donations.

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Annual Report Description
We are pleased to provide downloadable versions of Our Year in Review 2021/2022 and annual reports from previous years. All downloads are available in the PDF file format.