With endowment underperformance, elite colleges facing new budget realities
- A new study conducted by the American City Business Journals reveals that 25 of the nation's wealthiest college endowments have dropped by a cumulative 4%, about $5.3 billion, over the last reporting period.
- More than 100 colleges and universities nationwide have endowments over $1 billion, but only one institution, Washington & Lee University, fell below that threshold over the last year.
- The total represents the worst decline since 2009, when endowments lost an average of 16% on annual returns.
While most of the nation's elite colleges will not have to worry about massive layoffs, drastic programmatic cuts or closure from the dismal endowment numbers, smaller institutions should be intimately concerned with underperformance in the markets, and its impact on scholarship support and operations. For many schools, double-digit percentage losses is the difference between making payments on capital debt and being in good accreditation standing, and being on the negative side of both.
Leaders should prioritize the need for finding revenue-bearing areas for campuses and programs, such as business incubation, space leasing and mixed-use strategy and consolidating certain operations and systems to help stabilize what could become a long-term issue with American markets.
- Washington Business Journal America's richest colleges and universities brace for budget hits as endowments stumble