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Universities see an increase in endowments, study suggests

Based on an annual survey, college and university endowments in the U.S. were up approximately 12 percent in the 2013 budget year. More than 80 institutions reported endowments at more than $1 billion.  PHOTO ILLUSTRATION BY MAYA DEVEREAUX/DAILY FREE PRESS

Based on an annual survey, college and university endowments in the U.S. were up approximately 12 percent in the 2013 budget year. More than 80 institutions reported endowments at more than $1 billion. PHOTO ILLUSTRATION BY MAYA DEVEREAUX/DAILY FREE PRESS

Although the United States economy is recovering from one of the worst recorded financial crises in history, a report published Tuesday reveals endowment funds at schools such as Boston University have increased.

The report, issued by the National Association of College and University Business Officers and Commonfund, evaluated the responses of 835 surveyed universities to process the overall average endowments of these schools, which increased by 11.7 percent in the 2013 fiscal year.

“The stock market is up a great deal in the last year, so this 11.7 percent increase is roughly what the stock market did,” said Randall Ellis, a College of Arts and Sciences professor of economics. “We’re coming out of the recession, and the stock market has been growing at a very healthy rate in the past year.”

The increase in endowments in 2013 displays a sharp contrast to the 2012 endowment return picture, said NACUBO Director of Research and Policy Analysis Kenneth Redd.

“The prior year, endowments returned -0.3 percent, which is basically flat, so this year, having an 11.7 percent return is very helpful,” Redd said.

Redd said the significant increase can be attributed to the growing strength of the U.S. stock market as well as the expertise of the endowment managers employed to manage finances at universities.

“Just like any investment, the value rises and falls based on two things: the strength of the financial markets and the skills of the investments,” he said. “… The U.S. stocks this year did really well, and many of our endowment managers and investment officers are very skilled and experienced. The fact that most campuses had a very strong year attached to the fact that investment managers have positioned themselves very well accounts for the improvements in the market.”

Sambuddha Ghosh, a CAS professor of economics, said the increase could be sparked from universities’ efforts to combat the failing economy by finding alternative ways to beef up endowments.

“Because of the [financial] crisis … the funding for universities has been cut,” Ghosh said. “All of this increased the effort of the universities to go out and look for other sources of funding … This could be coupled with some economic recovery that’s also happened. Effort to get more funding intensifies and then the economy picks up more steam.”

Reports showed BU’s endowment increased by 11.5 percent in the 2013 fiscal year, an investment return that remains consistent with the national average, said BU spokesman Colin Riley.

“Our endowment climbed to $1.4 billion based on a combination of new gifts, transfers and a preliminary return of 11.5 percent in fiscal year 2013,” Riley said. “This is consistent with what was reported nationally. To see double digit returns reflects very well on [BU’s financial] management.”

Although BU’s endowment is markedly low for a school of its size, Ellis said BU has been successful in its efforts to grow its endowment in the past decade by petitioning alumni to give donations.

“BU’s endowment is not as large as some of the other top-tier schools, because they were not as effective at fundraising during the ‘80s and ‘90s, but in the last decade they have done much better in growing their endowment,” Ellis said. “They’ve been reconnecting with the hundreds of thousands of BU alumni who were somewhat disaffected under the years with John Silber. Many of them are becoming more favorably inclined to give donations.”

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