College Endowments Lose at Least $94.5 Billion

Recent data shows that the aggregate investment loses at college endowments have been at least $94.5 billion (see WSJ article) from the five month period between July 1 and November 30 of 2008.

Source: Wall Street Journal

The losses have resulted in an average 23 percent decline - less than the 29 percent loss by the S&P 500 during the same five month period. Losses from illiquid investments, such as real estate and private equity, are not included in the reported numbers.

Such losses are causing many schools to consider spending cuts, and may force some to increase endowment spending rates. On average, college endowments spend 4.6 percent, but this figure could rise to 6 percent, higher than the minimum 5 percent annual payments required of private foundations.

Comments

[SivBum:]

23% decline means the Universities continue to outperform the market...of course we don't know if the figures had taken into account of new money inflows.

Jan 28 10:15 AM

[Lonnie:]

Universities which use their endowments like some trophy on a wall instead of reinvesting them in students, professors and curriculum deserve to have those endowments lose their value. Like farmers during the 70's crisis people are allowing speculation to determine the value of real investments instead of how that investment contributes to the core output of the business. If you don't have more students, staff or equipment in the buildings, or more productive students,staff or equipment in the building. The value of that campus building has not intrinsically changed after all, it's purpose is not to be sold but to be used. There has been a too high requisite of BS in this generation of MBA's. Everything around us is the result of financial illusion finally failing.

Jan 28 11:00 AM

[gordon:]

couldn't happen to nicer ELITISTS! These same elitists had money with Madoff, and are now lobbying hard to CHANGE THE SIPC INSURANCE ***RETROACTIVELY *** to "NO LIMIT" !!!!! Watch for the secret bailout!

Jan 28 12:14 PM

[notsosmart:]

those high values were phony to begin with.its all become a total nonsensical mess.the average dumb-dumb taxpayer is the victim of the gov. while the mugging continues.but not to worry.the super bowl stadium will be full. thats what is important.

Jan 28 12:51 PM

[joes:]

I didn't know that they were only spending 4.6% annually, not even the 5% typically spent by the "foundations" and their "let's maintain the high salaries and think carpets instead of actually solving problems" approach to giving away the money none of them earned.

I would like to see a rule that requires at least 20% distributions per year to reduce tuition. Follow the model being set by the new tycoons, Gates, Buffet (recently), Soros, Dell, Omyidar that want to give away large portions or all of their wealth to help solve issues now, not foundation that serve a modern day pyramids and provide reasons for banquets.

Jan 28 02:44 PM