Sur­vey: In­vest­ment by col­leges showed slower growth in 2019

Daily Southtown (Sunday) - - BUSINESS - By Collin Bink­ley

BOS­TON — Most U.S. uni­ver­si­ties made money on their fi­nan­cial in­vest­ments last year, but their re­turns were tem­pered by a global eco­nomic slow­down fu­eled by Amer­ica’s trade war with China, ac­cord­ing to an an­nual sur­vey of school fi­nance chiefs.

The sur­vey, re­leased Thurs­day, found that col­lege and univer­sity en­dow­ments re­turned an av­er­age of 5.3% in fis­cal year 2019, down from the pre­vi­ous year’s re­turns of 8.2% and 12.2% the year be­fore that. The re­turns in 2019 were among the weak­est in the past decade, but it’s still seen as a long-term re­bound over losses suf­fered fol­low­ing the 2008 fi­nan­cial cri­sis.

Har­vard Univer­sity re­mained the wealth­i­est school in the U.S., the sur­vey found, with an en­dow­ment val­ued at nearly $40 bil­lion. The Univer­sity of Texas sys­tem and Yale Univer­sity fol­lowed with about $30 bil­lion each, while Prince­ton Univer­sity and the Mas­sachusetts In­sti­tute of Tech­nol­ogy each had more than $26 bil­lion.

More than 100 schools re­ported en­dow­ments top­ping $1 bil­lion, but the vast ma­jor­ity of schools have far less. Out of all schools sur­veyed, the me­dian en­dow­ment was val­ued at $144 mil­lion, and 3 out of 4 had $500 mil­lion or less.

The sur­vey is based on data re­ported by nearly 800 schools across the U.S. and Canada. It was per­formed by the Na­tional As­so­ci­a­tion of Col­lege and Univer­sity Busi­ness Of­fi­cers, a na­tional group that rep­re­sents 1,900 col­leges and uni­ver­si­ties, and by TIAA, an in­vest­ment and bank­ing firm based in New York.

Uni­ver­si­ties with more than $1 bil­lion saw the great­est re­turns in 2019, the sur­vey found, with re­turns av­er­ag­ing just un­der 6%.

They fared bet­ter in large part be­cause they have the money to in­vest in ar­eas such as ven­ture cap­i­tal and pri­vate eq­uity, which saw some of the strong­est re­turns, the sur­vey found.

Schools that in­vested larger shares in U.S. stocks also fared well amid a block­buster year for the na­tion’s stock mar­ket, while those with heav­ier in­vest­ments in in­ter­na­tional stocks drew more modest re­turns. The groups be­hind the sur­vey at­trib­uted the slump to the U.S.-China trade war, say­ing it has slowed global trade.

Col­leges tend to have dif­fer­ent in­vest­ing strate­gies based on their wealth, the sur­vey found. The rich­est schools in­vest most heav­ily in a cat­e­gory that in­cludes ven­ture cap­i­tal fund­ing, hedge funds and pri­vate eq­uity, while schools with smaller en­dow­ments typ­i­cally fo­cus on U.S. stocks and bonds.

But schools with $25 mil­lion or less, the low­est cat­e­gory in the sur­vey, per­formed nearly as well as the rich­est schools in 2019. Their suc­cess was cred­ited to their re­liance on the U.S. stock mar­ket, which had its best re­turns in six years. The Stan­dard & Poor’s 500 in­dex, one broad mea­sure­ment of the U.S. stock mar­ket, rose 10.4% in fis­cal year 2019.

Still, the groups be­hind the sur­vey said schools’ shouldn’t strive to match the S&P 500, but should fo­cus on spread­ing their money over a wide range of in­vest­ments to safe­guard against mar­ket swings.

“There are go­ing to be times when the mar­kets are gang­busters and look re­ally good, while these port­fo­lios will not have re­turns that meet that,” Kevin O’Leary, CEO at TIAA En­dow­ment and Phil­an­thropic Ser­vices, said in a call with re­porters. “It’s a bal­ance to cre­ate con­sis­tent re­turns to match what we need to spend.”

Most uni­ver­si­ties in the sur­vey re­ported that they in­creased spend­ing from their en­dow­ments in 2019, with an av­er­age with­drawal of $30 mil­lion to sup­port their an­nual bud­gets. Over­all, about half of their spend­ing went to stu­dent fi­nan­cial aid, while the rest was split among aca­demic pro­grams, fac­ulty jobs and other costs.

Some of the na­tion’s wealth­i­est schools will soon face a 1.4% tax on their in­vest­ment earn­ings as part of a tax over­haul ap­proved by Congress in 2017. It will ap­ply to schools that have at least 500 stu­dents and en­dow­ments that amount to at least $500,000 per stu­dent.


Har­vard Univer­sity is the wealth­i­est school in the U.S., the sur­vey found, with an en­dow­ment at nearly $40 bil­lion.

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