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One of the most enduring rumours about St John’s’ wealth involves how far you can travel on its land. Cambridge to Oxford seems to be a favourite. Unfortunately, you wouldn’t get that far. With a couple of major leaps over gaps en route, you could get from the Great Gate to just short of the M11 on College land. Chris Ewbank, Senior Bursar

When speaking of the College’s wealth, most people are referring to the endowment, which is a mixture of property and securities assets, and is managed separately from the day-to-day finances.

The endowment supports the College by providing an annual payment, known as the distribution, which is targeted at 3% of the endowment value, with remaining investment returns devoted to maintaining the endowment’s purchasing power. As we have a responsibility not only to current students and Fellows but also to future generations, we must balance the need for a reliable annual income today with the need to ensure that the purchasing power of the endowment is not eroded over time.

More than 40% of the College’s expenditure is on the salaries of Fellows and staff, which in the long term tend to rise at a rate above inflation. When thinking about the endowment’s purchasing powers, St John’s therefore applies the notions of ‘College inflation’, which is set at RPI+1%. The endowment is growing, and more importantly it is also maintaining its purchasing power. However, much of the growth since 2008/9 has come from increases in UK property values and global stock markets and is therefore vulnerable to market corrections.

We are still assessing the impact of the Coronavirus pandemic on the endowment, and will update this page in due course.

The endowment distribution provides just over half of the College’s annual income, so the operational College inherits the endowment’s vulnerability to market corrections. As the largest expenditure is on people costs, the College is also vulnerable to changes in higher-education pay and pension payments. We include an annual depreciation charge of 2% of the value of operational buildings, which spreads the cost of capital building projects across accounting years, despite the fact that expenditure of this kind usually occurs in peaks and troughs over time.

The college currently runs at a small accounting deficit each year, but in real-cash terms we generate a surplus before capital expenditure:

The operational College’s financial year runs July–June. Therefore, the 2019/20 financial year was affected by the Coronavirus pandemic, resulting in the operating cash surplus being £500,000 less than had been forecast. The estimated impact of the pandemic on the 2020/21 figures is a reduction in the operating cash surplus of £800,000, the bulk of this being due to St John’s being unable to run any commercial conference or tourism activity in the summer of 2020. Due to the mechanism by which the annual endowment distribution is calculated, any negative effect of the pandemic on the endowment will take a couple of years to filter through to the operational College.

Between 2006/7 and 2015/16 we undertook the most comprehensive restoration of the College’s buildings since its foundation. We spent more than £63 million on projects, including the refurbishment of the Cripps Building, the Old Divinity Schools and Corfield Court. These works were funded through a combination of operational cash balances held at the start of the programme in 2006 (built up over previous years), operational cash flow, donations and, possibly for the first time in the College’s long history, borrowing. The decision to borrow money, rather than liquidate endowment assets, was based on the expectation that the endowment will outperform borrowing rates. These projects are now complete, and we have moved from a peak to a trough of capital building expenditure.

The priority now is to use the annual cash surplus to pay down the debt taken out to part-fund the recent building works, while also restocking operational cash reserves. This must be achieved while dealing with the tapering of the growth of the endowment distribution, reflecting lower expected future returns and the increase in pension deficit payments.

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The College's present resources are sufficient to maintain its current operation; yet the history of St John's is not one of merely drifting with the circumstances of its time…

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