UVa endowments remain strong despite poor national returns - The Daily Progress: News

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UVa endowments remain strong despite poor national returns

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Posted: Monday, February 4, 2013 8:43 pm

Despite poor investment returns for college endowments nationally, the University of Virginia’s endowment grew slightly last year, according to a new report.

College endowments slipped 0.3 percent last fiscal year, following a 19.2-percent surge in fiscal 2011, according to a survey by the Washington-based National Association of College and University Business Officers.

“So that’s obviously a huge swing,” said Kenneth E. Redd, director of research and policy analysis at the association.

The return on UVa’s endowment was 5.1 percent, according to university spokesman McGregor McCance.

UVa and the joint report define the school's endowment in slightly different ways. UVa looks at what it calls the long-term investment pool, which includes the endowment itself and a number of other accounts it controls, such as those belonging to UVa-affiliated foundations.

The joint report says the UVa endowment moved from $4.76 billion in the prior year to $4.79 billion last fiscal year, while UVa reported that the long-term pool was worth $5.59 billion for the quarter ending Sept. 30.

The joint report lists UVa’s endowment as the 19th largest in the nation, behind the likes of Cornell, Duke and the University of Michigan. Harvard's endowment, the largest, dipped by more than 4 percent to about $30.4 billion, according to the report.

Redd said that the biggest drags on endowment performance were international equity -- down about 12 percent -- hedge funds and a lackluster domestic economic picture.

The fact that colleges, on average, aren’t increasing the size of endowments through investment hasn’t stopped them from spending endowment money, Redd said.

“Overall, despite the negative returns, endowment spending has grown fairly substantially,” he said.

Year-over-year endowment spending increased by 7.1 percent overall and about 16 percent among schools with endowments of more than $1 billion, he said.

UVa’s Board of Visitors increased the school's year-over-year endowment payout by less than 3 percent, from $134.9 million to $138.9 million this year.

Students are struggling in the down economy, and faculty and staff need money for research, Redd said.

The big source for new endowment money is gifts, which were mixed in the most recent year, Redd said. Colleges garnered an average of about $8 million in new gifts for endowments, while a third reported a decline in gifts, he said.

Despite the dispiriting national numbers, Redd said, endowments’ long-term performance remains strong, at about 6 percent a year, better than the S&P 500, the index of the top 500 publicly traded companies in the U.S.

“While this year was pretty disappointing, endowments are designed to last into perpetuity,” he said.

In the presence of such factors as flagging state money to public schools, the institutions that continue to thrive are those that can squeeze costs and take advantage of such changes as online learning, Redd said.

Those are among the priorities UVa officials have cited as its leaders look ahead to an evolving era in higher learning marked by increased financial pressures and the push to maintain academic quality.

The National Association of College and University Business Officers represents more than 2,500 colleges, universities, and higher education service providers across the country and around the world, according to its website.

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