Since my return to Wesleyan in 2007, alumni have often asked me why our endowment no longer ranks among the largest of small liberal arts schools. In the early 1980s, our endowment was roughly equal to those of Amherst and Williams, and now it is less than half theirs. “What happened,” I’ve been asked again and again. And, “What are you doing about it?”
The story is simple, and it’s not a tale of poor investment decisions. Our investment returns since the 1980s have been about average for our peer group of colleges and universities. Wesleyan’s best-performing peers benefited from much greater giving to their endowment and compounding of those gifts in strong equity markets. The choices we made about how to deploy our capital, however, were skewed. We spent too much and saved too little.
Our institution today is financially sound. Still, it has become clear that we need to take a fundamentally different approach in order to build our reserves and have maximum flexibility for future initiatives. For that reason, last semester we decided to change significantly the ratio of spending to investing at Wesleyan. We have reduced our spending draw from the endowment. Furthermore, where we typically spent 75% of the money we raised annually, our policy now is to save and invest most of these funds. Next year, for example, our goal for the annual fund, which provides for operating expenses, is only 29% of our total fundraising goal, down from about 40%. We are able to invest more because we have reduced our expenses and have a balanced budget. You can learn more about the history of Wesleyan’s endowment at this website.
We are rebalancing our spending and saving in other ways as well. We are taking advantage of improved markets to refinance our debt to stabilize annual interest payments. We have reduced the administrative staff by about 10 percent, and we are implementing numerous measures that will cut our base budget spending by about $25 million. In the coming years, we hope to triple the endowment for financial aid, adding the equivalent of 400 new scholarships, which will enable us to direct more of our annual operating funds toward enhancing education at Wesleyan.
We have hired 25 faculty members, and even as we secure our future financially, we are developing new curricular programs. Applications have soared by 30 percent in the last two years—students across the nation and around the world see Wesleyan as the exciting school all of us know it to be.
We will be discussing these developments with the Board of Trustees next week, and it will be my pleasure at that time to announce that two trustee families have pledged a total of $22 million, mostly to support financial aid endowment. We will celebrate their thoughtful generosity, which marks an important step in building a stronger economic foundation for the university.
With respect to performance and resources, we’ve been punching above our weight for a long time, and we’ll continue to do so. But with the help of the extended Wes family, we are also on track to create a sustainable economic context for the educational dynamism and practical idealism that have long characterized Wesleyan University.
Michael S. Roth