5C endowments reap unprecedented gains

(Samson Zhang • The Student Life)

Despite a year of hardship and uncertainty in 2021 due to the ongoing COVID-19 pandemic, the 5Cs experienced unprecedented financial gain as their endowment funds grew by up to 43 percent in the 2020-21 fiscal year, according to a TSL analysis of the colleges’ public financial statements.

Endowment funds are made up of donor and college contributions, as well as returns from the investment of these contributions in public and private markets. COVID-induced fluctuations in the stock market caused a decrease in all five 5C schools’ endowment funds in the 2019-20 fiscal year, a sharp contrast to the past year’s increases.

Pomona’s endowment fund, the largest of the 5Cs, grew 25 percent from $2.254 billion to $3.031 billion in the past year. CMC’s endowment fund, the second-largest of the 5Cs, grew 42 percent from $855 million to $1.22 billion.

Scripps College saw the highest percentage increase in their endowment fund, growing 43 percent from $375 million to $540 million. In addition to investment returns, $15 million of the increase came from pledge payments and the maturity of a planned gift, according to Scripps spokesperson Rachael Warecki SC ’08. 

Harvey Mudd College’s endowment increased 38 percent from $321 million to $444 million in the last fiscal year.

Pitzer College has the smallest endowment fund of the 5Cs and also saw the smallest endowment increase over the past year, growing 24 percent from $144 million to $179 million.

“[The spending policy]…allows for prudent and measured growth when the endowment value increases.”

Andrew Dorantes, chief financial officer at Harvey Mudd

All five undergraduate Claremont Colleges spend a small percentage of their endowment fund each year on operational costs such as financial aid, faculty and staff salary, and campus maintenance. Each year, each 5C school spends between 4 to 5.5 percent of a 4-5 year average fund value, with the exact percentage and rolling average window varying by school.

“[The spending policy] protects the College from needing to immediately reduce spending and negatively impact scholarships and programs when the stock market declines in a given year and also allows for prudent and measured growth when the endowment value increases,” said Andrew Dorantes, the chief financial officer at Harvey Mudd.

Though only a small percentage of the endowment fund is spent each year, spending policy income makes up a significant portion of the colleges’ annual operational funding. 53 percent of Pomona’s FY 2020-21 operating budget came from the spending of endowment funds, for example.

(Samson Zhang • The Student Life)

Despite this year’s increase, administrators have moderate expectations for the market moving forward.

“We anticipate that returns will be much more muted, compared to what they were the year before, or compared to last year,” Pomona’s Chief Investment Officer Dave Wallace said.

“With inflation at a much higher rate than in recent years, this will be a challenging year,” Warecki said. “We cannot predict the future, but can protect our chances of preserving capital by diversifying our assets and using this smoothing rule in spending allocations.”

That doesn’t mean that this year’s increase won’t make a real difference for 5C communities. 

“We’re going to see the impact of this past year of increasing returns and greater spending over the next couple of years, which will allow us to meet our growing costs and do the things that we want to do as a college,” said Robert Goldberg, Pomona’s chief financial officer. “That’s the beauty of our spending rule.”

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