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College endowments suffer worst loss since Great Depression



A recently released study by the National Association of College and University Business Officers and Commonfund found that university endowments dropped an average of 18.7 percent over the last fiscal year. As noted in the New York Times, that drop-off is the worst of its kind since the Great Depression.

Part of the explanation for the steep decline stems from college endowment managers shifting from typical stocks or “fixed-income instruments” to private equities, venture capital and private-equity real estate. With all of those investments suffering in 2009, endowments had no choice but to follow suit.

In a surprising twist, the schools with the largest endowments saw the largest hit. Harvard, Yale and Stanford each endured losses of over 26 percent of their 2008 value. Debt was revealed to be increasing while the amount of gits fell off.

Despite these setbacks, the spending of endowments increased slightly from 4.3 percent in 2008 to 4.4 percent last year. The New York Times goes on to explain that since universities base their endowment spending levels on the previous three year’s endowment values, schools won’t start to cut back on that spending any time soon.

You can view the list in its entirety here. (PDF)

Our Take

Following the freezes or returning of executive salaries, as well as the multitude of disheartening departmental budget cuts, this endowment study comes as another junk shot to the nation’s universities. With the financial shackles still not lifted from America, companies and individuals simply do not have the same ability to donate with which they are accustomed.

Endowments are instrumental in helping a university continues over the long-term, so this next year of donations will be crucial after 2008’s slight loss and 2009’s significant drop. Let’s hope this gets back on track so schools won’t be forced to cut back on their spending even further
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