Battered economy hits college endowment funds
By DAN MINER
dminer@bizjournals | 716-541-1616
What happens in the EU, apparently, is felt at UB.
Local colleges say overseas investments have been battered over the past year as a result of Europe's financial turmoil. That has had a real-world impact on endowments, though some are still reporting recent gains due to fundraising.
That describes the University at Buffalo's endowment fund, which continues a recovery toward pre-recession levels even while investment returns have slowed. An anonymous, $40 million gift was the biggest reason the fund rose from $494.8 million to $511 million in the 2011-12 fiscal year.
The fund reached a peak of 2007 of roughly $582 million but later dropped to as low as $410 million.
Without the donation, it would have been a different story. But Edward Schneider, executive director of the University at Buffalo Foundation Inc., said institutional investment is more focused on long-term gains, which he said have been generally positive since 2008.
UB's endowment has traditionally been a small part of its budget focused on specific programs. President Satish Tripathi signaled the growing importance to the university in a recent address. It will be used to support the school's efforts at recruiting "outstanding" faculty and in scholarship support for students, Tripathi said.
"This president has seen the importance of building the endowment for the university and the impact it will have 30 to 40 years from now," Schneider said. "It's a very important part of the future of this university."
The local trends are reflected nationally, according to recently released preliminary data from the 2012 NACUBO-Commonfund Study of Endowments. Return on endowments nationally was an average of -0.3 percent, compared to the 2011 average return of 19.2 percent.
"Many institutions had investments in European companies go down sharply," said Ken Redd, director of research and policy analysis for NACUBO. "It's a reflection of the euro crisis and the situation in Greece and other economies overseas."
Endowments have become increasingly important in recent years, as schools have looked to them to offset increases in tuition and put together attractive packages for faculty members.
• Niagara University's endowment dropped 20.6 percent in one year between 2008 and 2009, then rapidly recovered over the next two years. Returns have since struggled but the fund is still just under its $52.8 million pre-recession level.
Like Schneider of UB, Michael Jaszka of Niagara said the endowment is an important feature at NU that is best perceived through a long-range lens.
"We look at fluctuations but don't make hasty decisions," Jaszka said. "When the market bombed, we didn't change our allocation strategy at all. If we were more conservative, we would not have regained our endowment value."
Since May 31, returns appear to have been good, said Jaszka, vice president for administration. Preliminary numbers show the fund up nearly $4.5 million.
• The story was a different one at SUNY Fredonia, where conservative investing has led to a 10.85 percent return in 2012. The school had a tepid 2011, though, with only a 1.07 return. Fredonia, which finished a three-year fundraising campaign in 2011 that realized $16.7 million, has a portfolio valued at $23 million, which even dwarfs its early 2008 number of $16.93 million.
"We don't have any money in hedge funds or anything of substance in terms of metal commodities and that sort of thing," said David Tiffany, executive director of the Fredonia College Foundation. "It's a very conservative approach and so far in 2012 it's worked, as you can see. But in 2011 it didn't."
• Buffalo State College's endowment also showed growth during the 2011-12 fiscal year, though school officials said it was mainly due to the school's ongoing fundraising campaign. Investments over that time period were relatively flat, said Susanne Bair, vice president for institutional advancement. The money is especially important for students scholarships, Bair said.
"The nice thing about an endowment is it's there in perpetuity," she said. "Whereas state funding may go up or down, that endowment is something we can really count on."
• D'Youville College's endowment was also down about 1 percent in fiscal 2011-12, though - like other schools - that year ended in late May during a low point for domestic markets. June and July were better months, said Ed Johnson, vice president for financial affairs.
Endowment funds are extremely important for several reasons at D'Youville, which runs mostly on tuition revenue, said Johnson. It allows for the school to withstand enrollment fluctuations, provides inancial aid to deserving students and acts as seed money for new programs and projects.