The well endowed endowment

By Brendan Boyle

The University’s endowment returned gains of —16.6 percent in fiscal 2004, according to Joanna Rupp, Chief Operating Officer and assistant vice president of the Office of Investments. This improves on the 2.9 percent gain for 2003 and tops the 15.1 percent national average return on university endowments as reported by The National Association of College and University Business Managers. But it falls short of the average return for endowments larger than $1 billion. The University’s endowment, now standing at $3.6 billion, is the 15th largest in the country.

“We are pleased with this past year’s performance,” Rupp said. “The growth was fueled by strong returns across all asset classes and is reflective of gains in the capital markets generally.”

A report to President Randel and the Investments Committee of the Board of Trustees has just been finished. The Office of Investment does not release details of the endowment’s performance to the public, although the information is included in the University’s financial statements.

2004 was a strong year for university endowments nationwide, that reverses a period of relatively low growth. Endowments returned an average of 3.8 percent over the past five years. These gains were, in many cases, scarcely large enough to keep pace with inflation.

The total market value of the University’s endowment peaked in 2000 at just less than $3.8 billion. It trended downward for the next three years, bottoming in 2003 at $3.2 billion before beginning to appreciate again. The endowment’s funds cover a range of operating expenses.

Rupp admitted that recent years have been difficult. “But even in difficult market conditions, the endowment has consistently outperformed the benchmarks set by the Investments Committee.”

The Russell 3000 Index was up 20.5 percent and the S&P 500 19.1 percent over a comparable period. Rupp added that returns in the first half of fiscal 2005 have been solid, but she declined to provide specific data.

While the national average return was 15.1 percent, the average return for endowments larger than $1 billion was 17.2 percent. Harvard’s endowment returned 21.1 percent, Yale’s 19.4, and Stanford’s 18.l. Medium-sized endowments, those valued between $500 million and $1 billion, were the strongest gainers in 2004, with a return of 17.9 percent.

Harvard’s $25 billion endowment is the country’s largest, almost twice that of second-place Yale. The University of Texas, Princeton, and Stanford round out the top five. Northwestern overtook Chicago last year and now stands in 14th place. Its endowment grew by 20.2 percent in 2004 to $3.66 billion. This was one of the largest annual gains recorded in NACUBO’s endowment survey.