Ahead of Higher Ed: University endowments increase nationally

In the 2013 fiscal year, universities across the country saw an increase of about 12 percent on average in their endowments after recent years of decline.

According to a survey of more than 800 universities in North America conducted by the Commonfund and the National Association of College and University Business Officers, responding universities averaged a 11.7 percent increase, Inside Higher Ed reported.

A university endowment refers to large monetary contributions from individuals or companies to a university that is invested by the institution. The original contribution is left otherwise untouched in the endowment, but the returns made from the invested donations then fund scholarships, campus programs and distinguished chairs and professorships, according to the UH website.

“An endowment allows your gift to make a difference every year and to grow over time,” the UH website said.

Not only are investment returns increasing, but the surveyed institutions reported an increase in giving. On average, spending rates increased, and 67 percent of the surveyed schools indicated that they increased spending in 2013, according to the Chronicle of Higher Education.

Included on the survey was a question about the investment platforms of the investments. The highly endowed institutions with $1 billion or more, such as Harvard or Yale University, which both tout more than $20 billion endowments, cite “alternative strategies” of investment, like hedge funds, real estate and private equity, according to Inside Higher Ed. Less endowed universities that fall in the $25 million range reportedly rely on United State stocks and were more likely to invest in the bond market, which worries Bill Jarvis, the managing director of the Commonfund Institute.

“It was an interesting demonstration of how you can have many sources of return,” Jarvis said to Inside Higher Ed. “There’s this false perception that bonds are a safe asset.”

Larger or more prestigious universities topped Inside Higher Ed’s list of Colleges with the Largest Endowments in 2013. Coming in third, the University of Texas System had an endowment of more than $20 billion in 2013, which was a 12 percent increase from 2012. Rice University made the list at No. 20 with more than $4.8 billion — a 9.5 percent increase from its $4.4 billion in 2012.

The University of Houston System did not make the 2013 large endowments list, but did stay in keeping with the national increase trend. According to the Chronicle of Higher Education, the 2013 budget year yielded a $716 million endowment, a 9.86 percent increase from 2012. UH saw a steady increase in its endowment since 2009 until the 2012 fiscal year. From 2011 to 2012, the endowment dropped to $652.1 million from $662 million.

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