College endowments' worst year since 1974
Enviado: 24/1/2003 17:03College endowments last year turned in their worst performance since 1974, a stark contrast to the investment boom of the 1990s and a financial blow at a time when many public colleges are losing state aid.
The average college endowment shrank 6 percent in the fiscal year ended June 30, 2002, according to a survey of 660 institutions released yesterday by the National Association of College and University Business Officers. The findings matched those of another study released last month by Commonfund Institute.
It was the first back-to-back decline since the Washington-based association began its survey in 1971. The 2001 survey showed an average decline of 3.6 percent.
Belt-tightening is evident at schools such as Boston University, with 29,000 students, which plans to cut faculty positions through attrition, and tiny Hillsdale College in Michigan, which is cutting four varsity sports teams. Even wealthy schools such as Dartmouth College and Duke and Stanford Universities have been forced to cut costs.
"It's forcing academic leadership throughout the country to really think about what's most important," said Scott Malpass, vice president and chief investment officer at the University of Notre Dame, where the endowment fell nearly 10 percent, to $2.55 billion, in fiscal 2002. "Some of it's healthy, but on the other hand, it's a tremendous challenge."
The average school's investments (not accounting for donations and spending) lost 6 percent. The best-performing endowment earned 10.1 percent; the worst lost 19.8 percent. The association did not identify the schools.
Colleges typically spend about 5 percent of their endowment per year. The 6 percent decline, however, outperformed all the major stock market indexes. And while the bear market has made it more difficult to raise money, two-thirds of the institutions in Commonfund's survey said they expected donations to be at least as strong this year as last.
In the Philadelphia area, in the fiscal year ended June 30, Swarthmore College took one of the largest hits, seeing its endowment shrink by $53 million last year, to $897 million. That follows a $14 million decline the previous year.
Lehigh University lost $69 million in endowment value. The University of Delaware lost $54 million. Haverford College and Franklin and Marshall College each lost $26 million.
On the other hand, some colleges that endured criticism for conservative investment strategies during the boom 1990s are now enjoying the benefits while their peers suffer. Temple University, for instance, heavily invested in bonds and saw its endowment hold steady last year.
The University of Pennsylvania heard griping when it shunned riskier investments such as venture capital in the late 1990s and did not score big returns. But the strategy paid off last year, as Penn preserved its endowment at $3.3 billion.
Many schools have also found a silver lining to the slump: They are refinancing debt at lower rates. And, schools insist, recent losses are a small price to pay for the enormous gains between 1992 and 2000, when endowments enjoyed double-digit investment growth every year but one, according to the association. Those gains funded scholarships, research, and an unprecedented campus building boom.
"You had the greatest expansion probably in the history of higher education," Malpass said, "in terms of scholarship aid, new facilities, and new programs."
The average college endowment shrank 6 percent in the fiscal year ended June 30, 2002, according to a survey of 660 institutions released yesterday by the National Association of College and University Business Officers. The findings matched those of another study released last month by Commonfund Institute.
It was the first back-to-back decline since the Washington-based association began its survey in 1971. The 2001 survey showed an average decline of 3.6 percent.
Belt-tightening is evident at schools such as Boston University, with 29,000 students, which plans to cut faculty positions through attrition, and tiny Hillsdale College in Michigan, which is cutting four varsity sports teams. Even wealthy schools such as Dartmouth College and Duke and Stanford Universities have been forced to cut costs.
"It's forcing academic leadership throughout the country to really think about what's most important," said Scott Malpass, vice president and chief investment officer at the University of Notre Dame, where the endowment fell nearly 10 percent, to $2.55 billion, in fiscal 2002. "Some of it's healthy, but on the other hand, it's a tremendous challenge."
The average school's investments (not accounting for donations and spending) lost 6 percent. The best-performing endowment earned 10.1 percent; the worst lost 19.8 percent. The association did not identify the schools.
Colleges typically spend about 5 percent of their endowment per year. The 6 percent decline, however, outperformed all the major stock market indexes. And while the bear market has made it more difficult to raise money, two-thirds of the institutions in Commonfund's survey said they expected donations to be at least as strong this year as last.
In the Philadelphia area, in the fiscal year ended June 30, Swarthmore College took one of the largest hits, seeing its endowment shrink by $53 million last year, to $897 million. That follows a $14 million decline the previous year.
Lehigh University lost $69 million in endowment value. The University of Delaware lost $54 million. Haverford College and Franklin and Marshall College each lost $26 million.
On the other hand, some colleges that endured criticism for conservative investment strategies during the boom 1990s are now enjoying the benefits while their peers suffer. Temple University, for instance, heavily invested in bonds and saw its endowment hold steady last year.
The University of Pennsylvania heard griping when it shunned riskier investments such as venture capital in the late 1990s and did not score big returns. But the strategy paid off last year, as Penn preserved its endowment at $3.3 billion.
Many schools have also found a silver lining to the slump: They are refinancing debt at lower rates. And, schools insist, recent losses are a small price to pay for the enormous gains between 1992 and 2000, when endowments enjoyed double-digit investment growth every year but one, according to the association. Those gains funded scholarships, research, and an unprecedented campus building boom.
"You had the greatest expansion probably in the history of higher education," Malpass said, "in terms of scholarship aid, new facilities, and new programs."