The steep declines are forcing colleges and universities across the country to contemplate wage freezes, layoffs and a halt to construction projects.
The drop found by the reports is the biggest in the
value of college and university endowments since the mid-1970s, said
John S. Griswold Jr., executive director of the Commonfund Institute,
which manages money for educational institutions and other nonprofits.
“It’s been very sudden in some ways,” Mr. Griswold said. “There were
people predicting the decline a year ago or more, but I don’t think
anyone could claim to see the extent of this. These are unprecedented
The reports, prepared for the National Association of
College and University Business Officers by the financial services
company TIAA-CREF and the Commonfund Institute, drew on data from 796
institutions for the 2008 fiscal year, which ended June 30, and on
additional statistics gleaned from a follow-up survey with 435 for the
period from July 1 to Nov. 30.
They found that while endowments
gained in value by about 0.5 percent in the old fiscal year, they lost
nearly a quarter of their worth in the subsequent five months, a period
in which the financial markets sank.
“It’s a rolling contagion that hit us,” Mr. Griswold said.
pain was spread among institutions large and small, private and public.
When endowments were categorized by size, even the least affected —
those worth more than $1 billion — were found to have lost an average of
20 percent. Those of $500 million to $1 billion saw the biggest
decline, about 25 percent. Public institutions lost an average of 24
percent, private institutions 22 percent.
“Both public and
private institutions are going to be very challenged, just in different
directions,” said P. Brett Hammond, chief investment strategist of
TIAA-CREF. “States are in trouble themselves, and the downturn in state
support comes along with declines in investments. In the private
sector, at the same time endowments have declined students need more
help than ever.”
is facing a 10 percent budget shortfall for the current fiscal year
because of a 27 percent decline in its endowment over the last six
months, a drop in state financing and alumni giving, and students’ need
for more financial aid, according to a report issued this week by the
university’s president, David J. Skorton. To close the gap, the
university plans to freeze campus construction and draw on $150 million
in reserve cash and $35 million more from the endowment than was
has already announced layoffs, and Dartmouth, whose endowment lost 18
percent of its value from July 1 to Dec. 31, has said they are
“We continue to fund approximately 35 percent of the
college-only operating budget through endowment distributions, and we
do not have additional revenue sources that can replace this level of
support,” Barry P. Scherr, Dartmouth’s provost, and Adam Keller,
executive vice president, said in a statement issued last week.
anticipate that some of our endowment investments will continue to show
losses,” they added, “and that many of our generous donors will be
unable to give at the same levels for some time to come.”
L. Schearer, president of the private Transylvania University in
Lexington, Ky., said the endowment there, which finances about a quarter
of the operating budget, had lost 28 percent of its value since June
2007. Transylvania has cut back on staff travel, declined to fill job
vacancies, frozen overtime and halted all construction projects. The
university is planning a major fund-raising push in the next year to
help make up for the endowment losses.
“We’re going to have to
capture some of that money back,” Dr. Schearer said in an interview.
“We’re not looking at this as if there will be a rapid recovery. We’re
anticipating a slow and gradual recovery.”
Sixty percent of the
institutions responding to the follow-up survey said they did not expect
to change the amount they draw from their endowments in the current
Mr. Griswold thinks that wise.
aren’t making snap decisions, decisions that seem based on a panic
reaction,” he said. “That’s terrific. They should keep a steady hand on