University Endowments Across NC Lose Value

Jan 31, 2017

University endowments across the nation took a hit last year, and North Carolina’s universities were not spared.

Among North Carolina universities, six of the seven largest endowments declined in value. Duke University experienced the largest decline as its endowment fell 6.3 percent to $6.8 billion as of June 30, 2016, the end of the fiscal year.

Every year, the National Association of College and University Business Officers and CommoFfund release a comprehensive report that compares more than 800 endowments at universities across the nation. Duke is the 15th largest endowment in the nation. UNC-Chapel Hill is the 35th largest in the nation, and the eighth largest individual public university.

The UNC endowment value declined 3.3 percent and the N.C. State endowment gained 1.5 percent, one of the few large endowments to gain in value in the 2015-16 school year.

Endowments at most of North Carolina's biggest universities took a hit last year.
Credit NACUBO Commonfund study

The change in endowment value includes spending on scholarships, professorships and other endowment responsibilities as well as investment losses against new gifts. By measuring investment performance alone, Duke posted a 2.6 percent loss.

Unlike retirement savings, an endowment’s life is intended to last forever. Generally, endowment fund managers look to hit a growth rate of 7.4 percent annually and spend about 5 percent of the total endowment. This allows the fund to grow for the future as well as benefit current students simultaneously.

NACUBO President John Walda expressed concern that future scholarships could be cut if poor returns continue. “This suggests that it may become even more difficult for schools to raise their spending dollars even more if this low return environment continues,” he said. “Almost 40 percent of new gifts to endowments in 2015, went to student financial aid.”

Credit NACUBO Commonfund study

Taking a national view shows that endowment returns were down across the country. Taken as a whole, endowments returned an average 1.9 percent loss last year, compared with a 2.4 percent gain the previous year, according to the NACUBO-Commonfund study. This was the lowest average return since the 2008-09 year that included the financial collapse.

As with other wealth metrics around the world, the richest endowments control an outsized portion of the total wealth. The top endowment, Harvard with more than $34.5 billion, is larger than the smallest 489 endowments combined. The top eight endowments, or 1 percent of the 805 endowments analyzed by NACUBO, control 32 percent of the wealth, and the top 10 percent control 72 percent of the wealth.