Colleges reap dividends from flourishing market
But some local school investment leaders fear it won’t last.
Endowments at area colleges boasted big returns in 2017 thanks to a flourishing stock market, but local school investment leaders say they haven’t forgotten a lesson from the days of the Great Recession: Just as the market can go up, it can come down.
“I think there’s more awareness about risk overall,” said Bruce Guiot, Miami University’s chief investment officer. “You can have a set of statistics that’s telling you one thing, but when all hell breaks loose, sometimes statistics don’t matter any more. You need to realize it can all change very quickly.”
Endowments — investment funds used by colleges to pay for certain scholarships and jobs, among other things — are becoming more important to schools as tuition revenue falls at some institutions and inflation rates rise, according to a study out
this week from the National Association of College and University Business Officers.
Given their increasing reli- ance on endowments, colleges welcomed news this week that the funds brought returns on average of 12.2 percent in 2017, the NACUBO study shows. That’s up from average returns of -1.9 percent in 2016 and 2.4 per- cent in 2015, according to the study.
“Performance has been good over the last cycle,” said Terry Allman, PNC Bank’s Dayton market leader for institutional asset management. “I’m not comfortable making a prediction on how the market is going to perform over the next year, but we think there’s a lot of positives behind the current eco- nomic cycle and we don’t see any roadblocks in the markets themselves.”
Big colleges, such as Ohio State University, saw the biggest gains. OSU’s endowment increased by nearly 19 per- cent, or around $675 million, to a total of $4.25 billion, according to the study. In October, Ohio State invested another $819 million, bring- ing its endowment to more than $5.1 billion.
“We are pleased about our performance in the past year, but our focus is a longer time horizon than any single year. That’s why we are always focused on a diversified approach that includes steps to mitigate risk,” OSU officials said in a prepared statement.
The endowment gains made by Ohio State were the largest in Ohio and the 23rd largest in the country. At more than $36 billion, Harvard University reported the largest endowment in 2017, followed by Yale University with $27.1 billion.
Endowment funds grew by double-digits at seven of nine area colleges surveyed in the NACUBO study.
Wittenberg University and Wright State University were the only area schools that had single-digit growth last year. Wittenberg’s endowment was valued at $106 million and Wright State’s at $85.7 million. The University of Cincinnati’s grew to more than $1.2 billion, while Miami ended the 2017 fiscal year with an endowment of $512 million.
Although the University of Dayton’s endowment increased by 10.8 percent to $524 million, school officials cautioned not to expect the same performance year after year.
“We are very pleased with returns for this fiscal year,” said Andrew Horner, UD vice president for finance and administrative services. “But, I would say it is an outlier.”