More than half of flagship university endowments – funds that provide scholarships and special programs – weathered the economic firestorm of 2008 and 2009 and increased modestly over the past five years.
Thirty universities’ endowments grew from 2006 to 2010,while 18 shrank,according to a survey conducted by the Scripps Howard Foundation Wire of 48 flagship universities and their nonprofit foundations.
Foundations linked to public universities (called IRFs) that manage universities’ endowments with substantial assets in fixed incomes and domestic equities have done particularly well in the past two years,said William Jarvis,managing director of the Commonfund Institute,which provides education about investing for nonprofits and universities.
“They were in the spot that was the sweet spot,” Jarvis said. “If the stock market slows down,IRF’s will also slow down.”
Endowment data for 2009 and 2010 were collected from the National Association of College and University Business Officers-Communfund Study of Endowments. Data for 2006,2007 and 2008 were collected from the NACUBO Endowment Study.
Other data were obtained from university and foundation officials. The Scripps Howard Foundation Wire collected data about one public university in each state,the campus the state designated as its flagship,four-year school. For states without flagships,or for those with more than one,the SHFWire chose the public university with the largest enrollment.
Consistent data for the University of Maryland,College Park and the University of South Carolina,Columbia were not available from the NACUBO-Commonfund reports,and the universities did not respond to requests for information.
The financial crunch made it difficult for university endowments to maintain spending levels and payout rates. Bryan Benchoff,president of the University of South Dakota Foundation,said the foundation supported the university at the same spending levels during “scary times” and still grew to $126 million in 2010,a 24 percent increase since 2006.
“Our board won’t pull the rug out from the university,” Benchoff said. “We still kept the same payout rate while others did not. … I was proud of that.”
A diverse investment portfolio,change in investment philosophy,an ongoing $1 billion campaign drive and two $100 million gifts from oil tycoon T. Boone Pickens have fueled the Oklahoma State University Foundation’s endowment’s surge,said foundation President Kirk Jewell.
The endowment was $382 million in 2006 and was valued at $620 million on March 31. Jewell said the endowment’s growth will fund scholarships,faculty positions and new facilities.
“It’s not only our investment performance. From a fundraising standpoint,we’ve done more in the past three years than the past eight,” he said.
The OSU foundation was not immune to the financial tumult of 2008. The endowment plummeted from $617 million in 2008 to $454 million in 2009.
A similar mix of solid investing,alumni involvement and internal culture change helped spark massive growth in the endowment of the University of Massachusetts system. The UMass system includes five campuses.
Jack M. Wilson,UMass system president,said educational programs for university officials and a volunteer alumni endowment committee of “rock star” finance executives,were created to stress the importance of a strong endowment.
“Building an endowment wasn’t seen as critical to the success of the institution,” Wilson said. “We put individuals in place that knew raising an endowment was a very important aspect of a public university.”
The endowment mushroomed to $459 million in 2010 from $260 million in 2006.
The endowment’s growth has allowed the UMass system to establish new scholarships,professorships and increase financial aid.
UMass’s endowment fell from $390 million in 2008 to $372 million in 2009.
The financial trauma of 2008 and 2009 caused the University of Alaska Foundation to reassess its investment philosophy,said Tammi Weaver,the foundation’s chief investment officer. The foundation manages assets and the holdings of the system’s three main campuses and affiliated community colleges. The endowment increased from $266 million in 2006 to $311 million in 2007 before sinking to $213 million in 2009. Alternative investments that did not survive the crisis were a major reason the endowment plunged Weaver said.
“Five years ago,we were trying to look like the big guys and moving toward heavier alternative investments,” she said. “It hit us hard. We started discussions before the economic crisis,but the recession drove it home.”
The endowment’s estimated value was $256 million as of March. Weaver said she hopes that a new state law providing tax exemptions to corporations making donations to higher education and a new investment strategy will spur the endowment’s growth.
“We’re trying to keep it simple,transparent and focused,” she said.
Ohio State University learned even the most diversified portfolios are not insulated from the pressures of the market,said Jonathan Hook,the university’s chief investment officer. Its endowment shriveled to $1.6 billion in 2009 from its all-time high of $2.3 billion in 2007.
A reformulated investment strategy instituted in mid-2009 helped the endowment to exceed performance expectations. The endowment was valued at $1.9 billion in 2010,and Hook said it has now vaulted past its 2008 value of $2 billion. He expects the endowment to surpass its 2007 value soon.
“As of today,the morale around campus is very strong with many positive changes occurring,one of which is the positive trend of the endowment,” Hook said in an e-mail.
Bill Nevin,director of communications for the West Virginia University Foundation,said the endowment’s recent struggles are not unique. The WVU Foundation’s endowment was $381 million in 2006 and peaked at $437 million in 2007. It is now valued at $337 million.
Rick Kraich,vice president of investments at the WVU Foundation,said the endowment is performing well.
Nevin said the foundation’s supporters donated $80 million in 2010.
“We still maintained confidence,” Nevin said. “People are very passionate about West Virginia University and still felt it was important to support the university even if they were faced with financial difficulties.”