Data show U.S. college endowments did well in 2011

Reuters News
Posted: Sep 27, 2011 12:28 PM
Data show U.S. college endowments did well in 2011

By Svea Herbst-Bayliss

(Reuters) - The Massachusetts Institute of Technology said its endowment gained 17.9 percent in its last fiscal year as the global stock market zoomed ahead.

The elite school, known for its strength in the sciences, said its endowment totaled $9.9 billion at the end of June, up from $8.5 billion a year earlier. Improved market values plus $403 million in new gifts accounted for the increase, the Cambridge, Massachusetts-based university said in a press release.

MIT is among the first top American universities to release annual performance data, and so far the numbers suggest this year's returns could be twice as strong as last year's, showing that endowments are recovering well from the financial crisis.

"We've now had two good years and that helps refill the coffers," said John Griswold, executive director of the Commonfund Institute, which manages money for educational institutions and other nonprofits.

MIT neighbor Harvard University last week reported even stronger returns, posting a 21.4 percent gain for the fiscal year that ended June 30. Harvard's endowment is now valued at $32 billion, making it the world's richest university.

On the West Coast, Stanford University said it achieved a 22.4 percent investment return, which helped its endowment rise by 19.5 percent in value to $16.5 billion.

Other wealthy universities, including Yale, whose investment prowess is closely watched in the asset management industry, are expected to announce their numbers soon.

Last year America's college and university endowment funds gained 11.9 percent.

Investment officers and analysts celebrated the early strong numbers but said they did not come as a surprise. The Standard & Poor's 500 index gained 30.7 percent during the 2010/2011 fiscal year, while a portfolio of 60 percent stocks and 40 percent bonds that schools often use as a benchmark returned 19.5 percent.

And the group warned of uncertain times ahead.

"While we're thrilled with investment returns and endowment growth over the past two years, Stanford's endowment still has not recovered the losses sustained in 2008-09," Randy Livingston, vice president for business affairs and chief financial officer at the university, said in a statement.

"We continue to be concerned about the possibility of reductions in federal research funding and an investment downturn driven by European debt problems and economic weakness at home," he added.

Many schools, including MIT and Harvard, have long relied on private equity, real estate and other marketable alternatives like hedge funds to boost returns.

But after the financial crisis, many opted for more conservative investing strategies to make sure they have enough liquid assets available to help pay the bills.

"There are still two things weighing on chief investment officers' minds: overall caution about the economy and having sufficient liquidity," Commonfund's Griswold said, adding that this explains why returns were strong but not as eye-poppingly large as they once were.

"Last year's numbers were very good, but the numbers for the first three months of this year are going to be grim. So it is not time to break out the bubbly just yet," Griswold said.

(Reporting by Svea Herbst-Bayliss in Boston; editing by John Wallace)