University endowments continue on the decline

Columbia University recently announced that its endowment lost 16.1% in its last fiscal year, far less than its Ivy League rivals Harvard University and Yale University.

The endowment of the New York-based school shrank to $5.7 billion as of June 30, 2009, from $7.2 billion a year earlier.

Still, Columbia’s investment managers performed better than most other big endowments, which reported a median loss of 18 percent. For example, the two richest schools nationwide, Harvard and Yale, each lost roughly 30 percent.

A handful of universities recently reported their investment returns. The schools all rely heavily on their endowments to help pay salaries and give financial aid to students, and many appeal to wealthy alumni for annual donations.

For years, Harvard and Yale, in particular, have been admired in the investment world for generating strong returns by relying on riskier alternative asset classes.

However, in the last fiscal year, those bets proved problematic, leaving schools that had stuck with more traditional investment routes better off as Yale and others are now bogged down by illiquid assets that have yet to rebound in value.

“Only a small fraction of our endowment is invested in publicly traded securities, so the recent stock market rebound has not had a substantial effect on that number,” Yale President Richard Levin and Yale Provost Peter Salovey wrote in a letter to faculty and staff that was obtained by Reuters.

New Haven, Conn.-based Yale reported a 30% drop in its endowment to $16 billion while Harvard, located in Cambridge, Mass., said its endowment contracted 27.3 percent. The University of Pennsylvania, in Philadelphia, lost only 15.7% after it put more of its assets into fixed income securities.

Yale said its plans to reduce payouts from the endowment by 6.7% this year and by an additional 13% in the 2010-11 fiscal year, according to the letter. It also plans to slow the pace of faculty recruitment.

The endowments appear to be moving in line with other university endowment funds.

In January, the National Association of College and University Business Officers reported that while university endowments dipped by an average 3% in the 2008 fiscal year, they shrank 23% from July to November 2008. —Reuters