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University News

Numbers tell sad story for peer schools’ endowments

By
Staff Writer
Monday, October 5, 2009

After a dismal year for university finances nationwide, losses reported by peer schools have been on par with the Brown endowment’s 26.6 percent decline.

Harvard and Yale, the two wealthiest U.S. universities, both saw the total value of their endowments tumble by nearly 30 percent between July 2008 and June 2009, the schools reported recently.

Princeton, the third-wealthiest Ivy, fared slightly better, losing just under 24 percent of its endowment, which is now valued at $12.6 billion.

Brown’s endowment, which had hovered near $2.8 billion before last year’s financial crisis, stood at just over $2 billion this summer.

Brown and other universities suffered their worst losses in the fall of 2008, and many had already announced big declines last winter. Cornell, for instance, reported a 27 percent decline in January, according to the Cornell Daily Sun, but earned 2 percent on its endowment from January through June, Joanne DeStefano, Cornell’s vice president for finance and CFO, wrote in an e-mail to The Herald.

Penn fared best among Ivy League schools, losing 15.7 percent of its endowment, the Daily Pennsylvanian reported last month. Columbia also reported a relatively small loss of just over 16 percent, according to the Columbia Spectator.

Dartmouth reported a decline of 18 percent through December 2008 earlier this year, according to its newspaper, the Dartmouth, but the school has not yet released a year-end figure, making it the only Ivy that has yet to do so.

Penn benefitted from selling 10 percent of its public equities in early 2008, possessing a large amount of assets in fixed income and apportioning equity to quality stocks, according to the Daily Penn and CNN. Harvard, meanwhile, performed poorly in all but a few of its asset classes, the university’s endowment office reported in September.

Beppie Huidekoper, executive vice president for finance and administration, said Brown’s endowment suffered in part because of what she called an “aggressive” portfolio.

“We just had a riskier portfolio with a better upside and a more challenging downside,” she said.

But Brown has done well on gifts and donations, Huidekoper said, allowing the University to continue with capital projects like the renovation of Faunce House and the construction of a new Creative Arts Center.

Many private universities outside the Ivy League experienced similar losses. James Hurley, associate vice president for Northwestern University’s office of budget planning, said the school is currently looking at a 23 percent loss, though data are not complete because its fiscal year ends in September instead of June. The Stanford Management Company reported an endowment loss of 27 percent and the Massachusetts Institute of Technology reported a drop of 20.7 percent.

Though the financial market has improved in recent months, schools nationwide might lose an average of approximately 20 to 25 percent of their endowments once data from fiscal year 2009 have been analyzed, said Ken Redd, the director of research and policy analysis for the National Association of College and University Business Officers.

The association will not release its annual report on the overall health of university endowments until January.

At the same time, state governments are starting to cut appropriations to public schools, which are less likely to depend on endowments but whose finances have also taken a hit because of the recession, Redd said.

“Public institutions may be in as much trouble,” he said.

When endowments decline, schools might freeze staff travel, stop hiring and lay off adjunct faculty — all measures that affect students, Redd said.

But one area schools tend not to cut during a recession, he added, is financial aid. Many instead keep and even expand aid to students “to the extent that is prudent,” he said.

Brown has followed that model and recently set aside funds for financial aid increases, The Herald reported last month. But the University has also slashed millions from planned budgets, instituted hiring freezes, scaled back services and laid off some staff in the past year.

Other Ivies have also resorted to layoffs and other cost-cutting measures but have not decreased financial aid.

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