College endowments dropped last year

Average endowment values for colleges and universities declined in 2012, a steep drop from the 19.2% average increase in 2011, a new study says.

The wealthiest colleges fared best: Their values on average increased slightly while less wealthy colleges posted slight dips on average. In all, endowments of 77 institutions in the USA and Canada were valued at $1 billion or higher.

Findings are based on surveys of 831 colleges and universities by the National Association of College and University Business Officers, a non-profit membership organization, and Commonfund, which manages assets for a number of colleges and universities.

At the top:

• Harvard, which posted a 4% drop, to $30.4 billion, continues to boast the largest endowment by far.
• Yale's endowment, the second-largest at $19.3 billion, was nearly the same as 2011.
• The University of Texas system, which saw a 6.5% increase to 18.2 billion, ranked third overall and first among public institutions.

Over the past several years, average endowment returns have fluctuated dramatically. They plummeted 18.7% in 2009, the worst decline for higher education since the Great Depression, then enjoyed double-digit increases in 2010 and 2011, the study said.

Flat endowment returns are relatively unusual in higher education, it said.

"Volatility is something that the managers of endowments have learned to live with, and ... it's a part of reality going forward as well," said Commonfund president Verne Sedlacek.

This year's 4.2% spending rate is down slightly from 2011, but the average dollars spent per institution increased 7%, the study says.

Critics of spending practices of the most highly endowed colleges and universities argue that colleges should put more of their endowment earnings toward students.

"Our colleges and universities are sitting on more endowment wealth than has been amassed by any other group of non-profit institutions in the history of our nation," says researcher Lynne Munson,who testified on the topic last summer before a Senate finance committee. "Their focus is on amassing these funds, not on spending them to help students and families today."