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Investments

The Smith College Investments Office oversees the college’s endowment. The purpose of the endowment is to provide significant, stable support for the college’s annual operating budget and to preserve the value of Smith’s assets in order to fund the college’s future activities in perpetuity. We pursue this objective through equity orientation and diversification and invest with a long-term outlook that provides enduring support to the college’s key initiatives.

Endowment Overview

Smith’s endowment was established in 1871 through a bequest by founder Sophia Smith and built by the generosity of generations of donors so that the college might educate its students for lives of distinction and purpose. 

Totaling $2.5 billion on June 30, 2023, the endowment is managed by the Smith College Investments Office under the supervision of the Investment Committee and the Smith College Board of Trustees. It is composed of thousands of individual endowed funds that are commingled in a single investment pool. The funds come with donor and trustee applied restrictions that specify a particular purpose for the gifts, thus providing vital support to areas such as student financial aid, faculty recruitment and retention, academic programs, and facilities.

Spending from the endowment contributes 44% of Smith’s annual operating budget and serves as the college’s largest revenue source. It subsidizes the cost of a Smith education for every student, regardless of whether they are on financial aid, and supports the college’s no-loans initiative. Because of the endowment, Smith is able to award need-based grants—the average amount of which is $61,315—to 87% of undergraduate students who apply for aid.

The Endowment & Socially Responsible Investing

First and foremost, Smith’s endowment fulfills the college’s educational mission and social purpose by generating attractive investment returns to fund the college’s key functions and initiatives, such as student financial aid, faculty support, curricular programs, and co-curricular activities.  

At times, the college may consider matters of social responsibility—such as tackling climate change—and the endowment. The Advisory Committee on Investor Responsibility, a subcommittee of the Investment Committee, oversees the process for considering such matters and advises the Investment Committee (and, through it, the board of trustees) on whether to take action.

What Does the Endowment Support?

Spending from the endowment supports all aspects of Smith College’s mission. (Numbers are based on the fiscal year 2023 endowment spending allocation.)

38%

Scholarship

22%

Instruction

21%

General Operations

14%

Program Support

6%

Museum & Libraries

Endowment Governance

Given the endowment’s importance to the college’s operating budget, Smith is acutely focused on the oversight, management, and stewardship of the college’s largest asset.

The Smith College Board of Trustees has a fiduciary responsibility and a legal obligation to act in the best interest of the college and ensure that the endowment supports both current and future needs. As part of its fiduciary responsibility, the board of trustees approves Smith’s spending policy, designed to balance the goals of maintaining purchasing power and providing sufficient, predictable income streams to fund operations. The target long-term endowment spending rate is set at 4.75% and the spending policy incorporates a smoothing rule to eliminate large annual fluctuations in spending.

The board of trustees delegates oversight and governance of the endowment to the Investment Committee. The Investment Committee is responsible for engaging in strategic thinking and long-term planning regarding the endowment. The Investment Committee approves asset allocation targets and ranges, asset class and portfolio benchmarks, and new investments recommended by the Investments Office. The Investment Committee—and through it, the board of trustees—also monitors the Investments Office’s performance to ensure that investment and financial objectives are met.

The Investments Office is charged with the day-to-day management of the endowment pursuant to the frameworks approved by the Investment Committee and the board of trustees. 

Endowment Investment Strategy & Process

The Smith College endowment is designed to address the college’s investment goals through equity orientation and diversification. The portfolio’s equity orientation, through global public equity, private equity, and venture capital investments, produces high expected returns, enabling the endowment to provide substantial support to the college and preserve its purchasing power. The portfolio’s diversification across asset classes is designed to reduce the variability of performance, while continuing to produce high expected returns, enabling the endowment to provide reliable resources to the college. 

The long-term target asset allocation below was approved by the Smith College Investment Committee:

Global Public Equity 27.0%
Absolute Return 23.0%
Private Equity 20.0%
Venture Capital 15.0%
Real Assets 8.0%
Fixed Income 5.5%
Cash 1.5%

The endowment implements its asset allocation primarily through allocating capital to pooled investment vehicles and commingled funds managed by third-party investment partners, as Smith believes that high-quality active managers are likely to generate attractive returns over long periods of time. The college cannot select the underlying investments in pooled investment vehicles and commingled funds.

The Investments Office leads the sourcing, due diligence, selection, and monitoring of third-party investment managers, subject to the approval and oversight of the Investment Committee. The Investments Office makes quantitative and qualitative assessments and conducts detailed due diligence to identify fund managers that meet Smith’s criteria

The Investment Committee provides oversight of the Investments Office to ensure that Smith’s investments are suitable for portfolio inclusion and aligned with the college’s objectives. Investments Office recommendations to the Investment Committee provide thorough research and analysis of a prospective fund’s team; organization; strategy; performance; risks; terms; environmental, social, and governance (ESG) considerations; and references. 

The Investments Office primarily uses allocations to active third-party fund managers to execute its strategy. Active managers make specific bets on their underlying investments, seeking to outperform passive market indexes by uncovering attractive opportunities and identifying market mispricings to generate excess returns. At times, Smith may invest in passive index funds and/or exchange-traded funds (ETFs) as a portfolio management tool to bring the endowment’s exposures into alignment with its approved asset allocation targets. These investments have broadly diversified portfolios that passively track specific market indexes, such as the S&P 500.

Aside from these passive tools and holdings of U.S. Treasuries, Smith rarely makes direct investments into companies, assets, or securities.

Learn More About Endowments

asset allocation: Asset allocation describes the proportions of an investment pool that should be invested in various asset classes. The Investments Office employs quantitative and qualitative tools to determine an optimal asset allocation that will meet the endowment goals of supporting annual spending and preserving the purchasing power of the endowment.

asset class: An asset class is a group of investment instruments that exhibit similar characteristics, such as expected returns, risks, and correlations. Smith currently invests across seven asset classes:

  • The global public equity asset class is expected to provide exposure to global listed stocks. Smith’s investment approach to global equities emphasizes active management designed to uncover attractive opportunities and identify market inefficiencies to generate excess returns relative to passive indexes.
  • Absolute return strategies provide significant diversification to the endowment. The asset class is expected to provide solid returns with lower volatility, largely independent of broad market moves. Absolute return strategies may include long/short equities, credit, distressed securities, merger and risk arbitrage, and other opportunistic strategies. Managers in this asset class may invest across the capital structure, globally, and in both public and private markets.  
  • Private equity managers seek to take advantage of the inefficiencies in the private markets and provide hands-on ownership to create value. The asset class will include leveraged buyout (LBO) managers, and may include growth equity managers as well. LBO managers typically take majority ownership stakes in profitable and mature private companies, funding a portion of the acquisition with debt and working closely with companies to create fundamentally more valuable entities through hands-on initiatives. Growth equity managers will generally negotiate structured minority ownership stakes in high-growth, maturing companies that are breaking even or profitable, funding the companies’ continued expansion with little or no leverage.
  • Venture capital managers focus on seed, early, and expansion-stage investments in high-growth, dynamic, and disruptive sectors and companies. The purpose of this asset class is to provide exposure to novel technologies, business models, and markets.  
  • Real assets strategies may include real estate, energy and natural resources (excluding fossil fuel-specific strategies), and infrastructure. Real assets investments are intended to generate returns and provide protection against unanticipated inflation, playing an important diversifying role in the portfolio.    
  • The fixed income asset class includes high-quality debt instruments such as U.S. Treasuries and should provide a liquid, reliable, and transparent source of capital for cash needs.
  • The cash allocation is necessary for liquidity management and will primarily include cash and cash equivalents that are short-term, high credit quality, and highly liquid. 

diversification: A diversified portfolio provides exposure across many asset classes possessing different expected return, risk, and correlation characteristics. Because asset classes should behave differently in a given market environment, diversification can reduce the overall volatility of a portfolio without sacrificing returns. 

equity orientation: Equity represents an ownership stake of a company. The value of that equity is equal to the total value of the company’s assets less the total value of its liabilities. Equity investments generally provide higher expected returns than other asset classes such as fixed income, causing the endowment to favor equity oriented strategies.

exchange traded fund: An exchange traded fund (ETF) is a basket of securities that trades on an exchange and can be bought or sold like a stock. ETFs are often designed to track a specific index, such as the S&P 500, and they offer lower expense ratios than buying the individual stocks in an index.

fiduciary responsibility: Under the Massachusetts Uniform Prudent Management of Institutional Funds Act (UPMIFA), boards of nonprofit organizations must manage endowment funds “in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.”

index fund: Index funds are investment vehicles designed to passively track broad market benchmarks such as the S&P 500. They offer lower expense ratios than buying the individual stocks in an index.

pooled investment vehicles and commingled funds: Pooled investment vehicles and commingled funds combine capital from many different investors into a single vehicle that is generally managed by a third-party fund manager. The fund manager makes investment decisions on behalf of the pooled vehicle; external investors are not involved in investment decision-making or the day-to-day operations of the fund. Investors generally participate in the gains or losses of the pooled vehicle in proportion to their interest in the fund, after taking fees into account. Fund managers may employ structures with lock-ups that dictate investors’ ability to redeem capital.

purchasing power: Purchasing power represents the “buying power” of a unit of currency and is eroded by inflation. To maintain the purchasing power of an endowment, that endowment must generate returns in excess of spending and inflation.  

smoothing rule: Smith’s endowment spending in a given year is equal to 80% of the previous year’s spending plus 20% of the targeted long-term spending rate applied to the endowment market value, the sum of which is adjusted for inflation. By incorporating the prior year’s spending, the rule eliminates large fluctuations, enabling the college to plan for its operating budget needs. By adjusting spending toward the long-term target spending level, the rule ensures that spending will be sensitive to fluctuating endowment market values, providing stability in long-term purchasing power.

Standard and Poors (S&P) 500: The S&P 500 is an index that tracks the stock market performance of the roughly 500 largest public companies in the United States.

U.S. Treasuries: U.S. Treasury securities are debt instruments issued and backed by the United States Department of the Treasury.

Information for Investment Partners

How Does Smith Select Partnerships?

Smith seeks long-term partnerships with exceptional investment firms that can generate attractive long-term performance to meet the college’s investment goals and support current and future Smith students.

People

Smith seeks to partner with high-integrity people who value mutual partnership and have demonstrated concern for fiduciary responsibility.

Organization

Smith targets partnerships with organizations that align interests between fund managers and investors, value communications and transparency, and are sized and structured appropriately in light of their strategies.

Strategy

Smith generally prefers firms pursuing bottom-up, fundamental investment strategies underpinned by rigorous research and repeatable investment processes. 

Why Partner With Smith?

Mission Driven

Investment returns generated by Smith’s investment partners further the college’s mission of educating women of promise for lives of distinction and purpose. 

Long Term

The ability to think and act long-term is consistent with Smith’s time horizon, and the college’s patient capital enables the endowment to tolerate short-term volatility in order to generate exceptional long-term returns.

Flexible

Smith partners with firms of various sizes, structures, and stages of development. 

Partnership Oriented

Smith seeks to manage a concentrated, high-conviction portfolio. Each of our investments is important to the endowment, and we want Smith to be an important partner to our investment managers. The Investments Office seeks relationships based on mutual partnership, and aims to provide support, engagement, and capital through good times and bad. 

Investment Committee

Members for 2024–25

  • Deborah DeCotis ’74, chair
  • Andrea Auerbach ’91, vice chair
  • Lisa Black ’81
  • MaDoe Htun ’84
  • Anne Martin ’83
  • Alison Overseth ’80
  • Sarah Willie-LeBreton
  • David DeSwert, nonvoting member

Smith College Investments Office Staff

  • Lisa Howie, chief investment officer
  • Brian Dwyer, director of operations
  • Caroline Thomas, director of investments
  • Corey Walker, director of investments
  • Jack Manning, investment analyst
  • Megan Feulner, executive assistant and office manager 

Phone: 857-392-3480