Endowment and investment strategy

Supporting the university

The main purpose of the endowment is to generate annual funding for Aalto University's operations to enable the university to fulfil its strategic goals as well as support high-quality education, research and innovation. The endowment provides the university with financial independence and enhances funding stability, both of which are deemed fundamental requirements for a top-class university.

Read our 2024 review for donors to learn more

Spending policy

Endowment Spending Policy sets principles for defining the level of spending from the endowment towards the university operations. The predefined spending policy provides a clear and transparent way to determine future endowment spending, that will support the annual operative planning of the University and donor communications, and sets a clear target for the endowment strategy, including a strategic risk/return profile of the endowment portfolio. 

The general endowment fund and capitalizing funds have a target spending rate of 2.5% per year, which is based on an expected long-term real return, in other words, a return above the inflation rate. This ensures that these funds will grow in line with inflation and can therefore support academic activities consistently and sustainably. Hybrid funds spend their fixed nominal return of 5% as well as the capital itself during the pre-determined duration of the funds. 

The actual annual spending is decided by the Aalto University Board each year and stability acts as the key factor in that decision-making. Changes in the portfolio market value and the overall funding of the university are also considered. 

Long-term investment strategy

The cornerstone of our investment strategy is our purpose – providing funding for the university while accumulating the real value of the endowment. Reaching these goals requires prudent and consistent risk taking over time. Concurrently, we maintain adequate liquidity in the portfolio to ensure our ability to cover the medium-term funding needs regardless of the market environment. Investments in private assets and the implementation of more advanced investment strategies will also be done when they offer attractive expected returns.     

Approaches to responsible investing

As we invest through investment funds, a key part of the investment process is selecting and monitoring these external fund managers. Our external managers are encouraged to use multiple approaches to responsible investing. For example, exclusions are a useful tool for some investment strategies, whereas integrated ESG (Environmental, Social, and Governance) analysis and active ownership can bring better results and impact on others. Our focus is always forward-looking, which means that the expected impact of investment decisions is evaluated.  

Responsible investing must be balanced between both risks and opportunities. In short, we control our exposure to investments with a high ESG risk and negative impact, while aiming to increase our exposure to investments with a positive ESG profile and impact.

Our long-term target is to have a carbon neutral portfolio. As a medium-term target, we will significantly reduce the carbon intensity of our portfolio. This is to be implemented gradually from 2021 to 2030 and we will begin reporting on carbon intensity and other responsible investing indicators in 2021. 

Our long-term target is to have a carbon neutral portfolio. As a medium-term target, we will significantly reduce the carbon intensity of our portfolio. This is to be implemented gradually until 2030. Thereafter, we target a declining trend of carbon emissions in line with global climate benchmarks. A more detailed description of our sustainability profile and roadmap to 2030 and beyond can be found in the latest release of our sustainability report and the latest endowment strategy publication.

Management and oversight