University endowments' investments up slightly

Tuesday, January 20, 2004

BOSTON -- University endowments earned an average of 3 percent on their investments last year, reversing declines seen in 2001 and 2002.

When inflation and spending from endowments were taken into account, schools were probably worse off on average in the year ending June 30 than a year earlier, according to figures released Tuesday by the National Association of College and University Business Officers.

But their investment performance was better than in 2001 and 2002, which saw declines of 3.6 percent and 6 percent. Since June, many endowments have risen considerably with the rising stock market.

"The good news is we turned the corner," said John Griswold, executive director of Commonfund Institute, a research center associated with nonprofit fund manager Commonfund. "The bad news is, it's not enough to cover the increases in costs and the spending that is normally taken out of the endowment."

The better performers in 2003 included the University of South Carolina system, which earned more than 5 percent on its investments and saw its endowment grow 6.8 percent to $312.5 million.

Overall, however, the wealthiest schools fared best.

The 39 schools with assets over $1 billion earned on average 4.1 percent, while schools between $51 million and $1 billion earned on average between 2 percent and 3 percent, according to association's survey of 723 schools. The smallest endowments earned on average 3.5 percent.

Schools depend on their endowments for as much as one-third of their budgets. Most schools spend around 5 percent of their endowment per year, requiring them to replenish at least that much through the markets and donations just to stay even.

Harvard, the world's wealthiest university, saw its endowment grow 9.8 percent to $18.8 billion. In September, Harvard disclosed its investments earned 12.5 percent.

Because endowments are also affected by withdrawals and contributions, they do not necessarily grow at the same rate as the investment performance.


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