Endowment

Managing money during volatile times

Colleges and universities are still trying to find equilibrium in a volatile economy

In How the Financial Crisis and Great Recession Affected Higher Education, Jeffrey R. Brown, a finance professor at the University of Illinois at Urbana-Champaign, and co-editor Caroline M. Hoxby, a Stanford economics professor, examine universities as complex economic organizations that operate in an intricate institutional and financial environment.

Is Fossil Fuel Divestment a Wise Move?

Making the case for and against stripping endowments of fossil fuel investments

Stop Feeding the Monster. End the Coal Age. Divest the West. Sandy Says: Divest Climate Destruction. Bound by Fossil Fuels, Freed by Action.

Messages like these have emblazoned banners on campuses across the country since 350.org’s Fossil Free divestment campaign began last November.

Day of Action for Divestment

Student groups at more than 60 college and universities hosted events to raise awareness and push for fossil fuel divestment as part of 350.org’s #FossilFreedom Day of Action.

Key Points: The New York Prudent Management of Institutional Funds Act

Although the legislation only applies to institutions based in New York, the New York Prudent Management of Institutional Funds Act of 2010 has led to discussion in other states about how endowments should be managed to respect donor intentions while meeting institutional needs. Some key points include:

Endowments: New Questions in the New Normal

What stakeholders really want to know

The financial crisis is in the past, more or less, and campuses are looking ahead to a new era for their endowments. But what does this mean? Four years on, we’ve come to grips with the changes wrought by the September 2008 market crash. Finance departments are revising their theories and boards of trustees are revising their expectations under what has been called the “new normal”—a time of low stock market returns, low interest rates, and low growth in personal income.

Higher Returns for Endowments

Understanding the value premium in the U.S. equity market

To outperform the broad U.S. equity market, many college and university endowments focus primarily on hiring active managers to outperform a narrow part of the market, such as large-cap growth or small-cap value, while maintaining an equal allocation between growth stocks and value stocks. In addition to active management, however, these endowments should also consider taking advantage of a structural bias that exists in the U.S. equity market: the outperformance of value stocks relative to growth stocks over longer periods (the value premium).

Donor Giving Strong

An Atlas of Giving report reveals that the education sector was the strongest for charitable giving in 2011. The sector received $54.30 billion in 2011, an increase of 9.8 percent over 2010 when donors gave $49.44 billion. Education still falls in second place to religious charities, with education accounting for 16 percent of total giving in 2011 and religion at 36 percent.

Behind The News

It's common to find students filing papers in campus offices, restocking library shelves, or checking IDs at the fitness center to make a buck. What's a little less common is students replacing sidewalks and entranceways to dorms, building fountains, and constructing additions.

Universities and Investment Fraud

Knowledge about operational due diligence and investment performance analysis, with a bit of skepticism as well, can help prevent getting tangled up in investment scandals.

Westridge Capital Management, formed in 1996, promised investors enhanced cash returns by trading equity index futures. The firm's performance was so attractive, a host of pensions and endowments invested with it, including Bowling Green State University (Ohio), Carnegie Mellon University (Pa.), Ohio Northern University, and the University of Pittsburgh. In 2009, the Securities and Exchange Commission alleged that staff at Westridge invested very little client money.

Who's On First?

Developing and managing endowed scholarship funds

Given the multiple goals and multiple players involved in developing and managing endowed scholarship funds, there are lots of opportunities for communication gaps, poor service, and less than optimal use of the funds. In an ideal world, endowed funds and annual gifts given for scholarship support would be used to take the place of unfunded aid in the offers made to students, freeing unfunded (and therefore unrestricted) resources for other purposes. However, many institutions are not able to achieve this efficient outcome for a number of reasons.

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