for the Period Ended December 31, 2024
Introduction
A well-managed endowment fund is a cornerstone of financial stability and long-term success for any institution of higher education. At Pratt, the endowment plays a vital role in advancing our mission, providing critical resources that enhance the student experience, supporting faculty excellence, and maintaining and improving our facilities. By generating a reliable stream of income, the endowment ensures that we can continue to offer competitive scholarships, attract and retain exceptional faculty, and sustain a learning environment that fosters creativity, innovation, and academic excellence.
A strong and well-managed endowment also enhances the college’s liquidity, allowing us to maintain a favorable bond rating and secure financing at competitive rates. This financial strength provides long-term stability, enabling strategic investments in cutting-edge programs, expanded student opportunities, and our commitment to social justice and sustainability. Through the continued generosity of our donors, the endowment strengthens our ability to adapt, grow, and lead in an ever-evolving educational landscape.
A prudent investment strategy, conservative spending policy, and the generosity of donors have steadily increased the value of our endowment fund over the years, growing from less than $20 million in 1985 to approximately $320 million in 2025.
Fiscal Year 2024 Gifts to the Endowment
During the past fiscal year, generous donors contributed over $6.8 million to the endowment. In addition to gifts in support of scholarships, this amount includes a $5 million donation from the Nord Family to create the Jane Nord Family Endowed Internship Fund. This unique gift will provide stipends to students who would like to pursue otherwise unpaid or underpaid internship experiences in their chosen fields. The Fund will be open to all student applicants from all degree fields and majors to support internship opportunities across all industries.
A Board Mandate: Reducing Fossil Fuel Exposure in the Portfolio
In fulfilling its mission to achieve the highest risk-adjusted returns, Pratt has also sought, where possible and advisable, to align our investments with our shared institutional values, including long-term environmental sustainability. A decade ago, in response to the existential threat of climate chaos, the Board of Trustees decided to dramatically reduce our fossil fuel exposure. We believed that such divestment was both a moral imperative and financially wise. This commitment has, in fact, very modestly improved our returns over the past decade, and we believe it will protect us from serious financial risk as the climate crisis worsens and a global shift toward a clean energy future accelerates. In addition, the Investment Committee has sought to make investments in social goods, such as affordable housing and renewable energy, where we believed that we could achieve market returns. This approach not only upholds our fiduciary responsibility but also positions our portfolio to thrive in a rapidly evolving global economy. We have also sought out investment managers from historically disadvantaged and under-resourced groups who bring new perspectives and opportunities for financial success.
In 2016, when the Board of Trustees approved the resolution to divest, the endowment fund was valued at approximately $150 million, with just under 3 percent of the portfolio invested in fossil fuels. Today, the endowment has grown to more than $300 million and includes less than 0.91 percent invested in fossil fuels.
Management and Oversight of Endowment Funds
Our endowment portfolio is managed with the goal of generating income while preserving or enhancing the purchasing power of these assets over time. The Investment Committee of the Board of Trustees is responsible for the oversight of the endowment, working in close collaboration with external consultants with significant expertise in endowment management. This partnership ensures that our investment strategy aligns with developing best practices and supports the long-term financial health of the Institute.
The Committee is guided in their work by an Investment Policy Statement (IPS), which is a written document that outlines how the endowment fund will be managed. It serves as a guide for making investment decisions and helps ensure that the fund is managed in a way that aligns with the goals, values, and financial needs of the Institute. The IPS describes investment objectives, performance benchmarks, risk tolerance, guidelines for asset allocation, and the endowment spending policy.
Historical Market Value of the Endowment
The market value of the endowment portfolio was $319,460,487 at December 31, 2024. The following chart tracks the market value of the endowment from June 30, 2014, to June 30, 2024.
Asset Classes and Allocation
To achieve its investment objectives, the endowment uses a multi-manager structure of complementary investment styles and asset classes to invest portfolio assets. An asset class is a category of investments that share similar characteristics and behave in a similar way in the market. For example, stocks, bonds, and real estate are different asset classes. Each class has its own level of risk and potential return. The purpose of allocating among a variety of asset classes and strategies is to ensure a proper level of diversification, enhancing total return while avoiding undue risk and concentration. The Institute’s Investment Policy Statement provides targets for asset allocation as well as lower and upper allocation limits for each asset class.
During the past fiscal year, the Investment Committee made a strategic decision to replace a number of actively managed U.S. and ex-U.S. developed equity fund investments with comparable index funds. In highly efficient, heavily-traded markets such as large-cap U.S. equities, long-term outperformance by active managers has been fairly rare, while index funds offer comparatively low fees. The portfolio will retain smaller satellite positions with a limited number of high-confidence active managers. Additionally, the Committee has developed a plan to increase the portfolio’s exposure to private equity and venture capital investments. While these investments are less liquid than other components of a diversified portfolio, incorporating them enhances long-term growth potential, reduces overall volatility, and provides access to unique investment opportunities before they become public. Prudent implementation of this shift in exposure will take several years.
On December 31, 2024, the actual asset allocation was aligned with the parameters specified in the Investment Policy Statement. The allocation percentage and market value are included in the following chart:
| Market Value (millions) | Asset % | |
|---|---|---|
| Domestic Equity | $147 | 46% |
| International Equity | $66 | 21% |
| Total Equity | $213 | 67% |
| Fixed Income | $26 | 8% |
| Flexible Capital | $36 | 11% |
| Private Equity | $8 | 3% |
| Real Assets | $26 | 8% |
| Cash + Equivalents | $11 | 3% |
Asset Classes Within Pratt’s Endowment Portfolio:
Spending Policy
The Board of Trustees authorizes total annual spending from the endowment. The approved spending policy appropriates 4.5 percent of the five-year average market value of the overall endowment investment portfolio for spending. From that amount, income equal to 5 percent of the five-year average market value of scholarship and other restricted investment funds are expended for awards, unless otherwise explicitly stipulated by the donor or by the Board, with the balance (board-designated endowment earnings) allocated to support general operations. The Board believes that this spending policy balances the need to provide consistent financial support for current operations, such as scholarships, faculty support, and facilities maintenance, while ensuring the fund’s long-term sustainable growth. The 4.5 percent rate replaces a 3.0 percent rate that governed endowment spending through the 2024/25 budget. This more cautious spend rate has enabled the fund to grow over the last 35 years from an operationally insignificant $20 million to today’s $320 million. The Board of Trustees has determined that this increase in the spend rate is appropriate to meet current needs while preserving the ability to serve future generations.
For the 2024/5 academic year, the total allocation from endowment funds was approximately $4.5 million which was used primarily to support student scholarships. That figure will rise to approximately $7.0 million for 2025/26 and include enhanced support for the unrestricted operating budget with priorities established by the Executive Committee of the Board of Trustees.
Performance
The performance of the endowment (at 12/31/24) is provided below. The benchmark is a blended composite of capital market indices that represent the target asset allocation and risk profile of the endowment.
| 1 YR | 3 YRS | 5 YRS | 10 YRS | |
|---|---|---|---|---|
| Total Fund | 12.0% | 2.2% | 6.6% | 6.8% |
| Benchmark | 11.4% | 2.5% | 6.5% | 6.6% |