After another slow economic year, the value of Boston University’s endowment dipped 13 percent last year, according to a yearly survey by the National Association of College and University Business Officers released yesterday.
The value of BU’s endowment stood at $578,473,000 at the end of the 2002 fiscal year, according to the survey, which reported an average 6 percent endowment drop among the 654 colleges and universities surveyed. BU ranks 77th in total endowment value after the fiscal year, according to the survey.
Last year’s declines come after BU’s endowment dropped in value by 27.2 percent during the 2001 fiscal year, from a peak of $931 million in June 1999. Endowments saw an average fiscal year 2001 drop of 3.6 percent, according to NACUBO.
Despite two straight years of value decline, BU spokesman Colin Riley said university officials are not alarmed at the latest news. Because the endowment makes up only approximately 1.75 percent of BU’s operating budget, he said endowment drops do not affect BU’s budget decisions as much as many other colleges and universities across the country.
“That has affected every university and college in the country,” Riley said. “The major difference is that Boston University’s [budget] isn’t endowment dependent and that is because ours has grown so substantially.”
BU’s budget is much more reliant on tuition and other sources of income, Riley said.
“It’s a major story for those universities that have begun to rely on [their endowments] or have a larger reliance on them,” Riley said later.
Drops in endowment value do not significantly affect BU’s building plans or tuition levels, Riley said. The endowment’s recent performance will not figure significantly into discussions about freezing staff salaries or the potential layoffs discussed during the fall, Riley said.
Though BU officials do want to see the endowment perform positively, he said its recent performance has not hurt the university.
“We would like it to be positive because it does provide more flexibility for the university to do things,” Riley said. “We would like it to be more substantial, but the key thing is that we don’t rely on it in a substantial way.”
Riley pointed to losses across the market over the past two years as a way to gain perspective on BU’s endowment losses. Though BU’s endowment has performed relatively poorly compared to the average university endowment, it has performed better than many market indicators.
“You have to look at the market,” Riley said. “People have to understand that as the markets go, the investments go. Everyone’s sort of watching the economy.”
BU’s endowment had gained value for a number of years in a row before the declines of the last two years, Riley said.
“With the endowment, as with the market, past performance is no indication of future value,” Riley said later. “We focus on long-term return.”
After the 2001 fiscal year losses, Riley said BU hired an outside agency to evaluate the university’s investment decisions after last year’s declines in value. The agency recommended some minor tinkering to the university’s investment decisions, but did not advise large-scale changes, he added.
BU’s endowment is still far smaller than some of the country’s top endowments. After a value loss of 4.4 percent last year, Harvard University’s endowment topped the list at $17,169,757,000, according to the NACUBO survey. The Massachusetts Institute of Technology’s endowment is worth $5,359,423,000, after 12.6 percent decline last year.
Boston College’s endowment stands at $964,313,000 after a 2002 decline of 3.9 percent.
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