Endowment falls short

A report showed a slight decline in FY2012 returns nationwide.

by Tyler Gieseke

The University of Minnesota’s endowment, part of which funds scholarships, followed a national trend in falling short of its growth goal last year.

The general goal for college endowments is to make about 5 percent in returns above the inflation rate, enough money to contribute to the school’s programs, like financial aid or faculty research.

But few schools met that last year.

The return for the University of Minnesota Foundation and the Consolidated Endowment Fund — together making up most of the University’s total endowment — was 1.6 percent in fiscal year 2012.

Similarly, the average endowment return nationwide was nearly stagnant, with a 0.3 percent decrease, according to a study of more than 800 colleges’ endowments released earlier this month.

The small decline in returns comes after an almost 20 percent increase nationwide in endowment returns in fiscal year 2011.

“It’s a little disappointing,” said John Griswold, executive director of the Commonfund Institute, which contributed to the study.

“This has been a very slow recovery from a very deep recession … and we’re still recovering,” he said.

The University of Minnesota Foundation, which manages more than half of the University’s nearly $2.5 billion total endowment, aims for that 5 percent yearly target, said Sarah Youngerman, vice president of marketing and communications for the foundation.

“Obviously, you know, 1.6 percent isn’t meeting the goal,” she said, but the foundation did exceed other institutions’ returns.

The return on the University of Nebraska Foundation’s endowment was a negative 2.6 percent, said spokesman Robb Crouch.

But he said this wouldn’t change the way the foundation manages the endowment. Instead, the focus is long term.

“For us, it’s not really important to look at one year,” Crouch said.

The University of Minnesota Foundation isn’t making immediate changes either.

Rather than looking at one-year returns, investments are made when considering long-term performance, Youngerman said. This way, the foundation can provide predictable and stable funding for its programs.

The foundation’s 10-year return on investments was 8.2 percent as of Sept. 30, according to a University of Minnesota Foundation report.

The University’s endowment contributes to all parts of the University’s mission, Youngerman said.

Last year, $169 million in gifts went toward faculty support, research, academic programs, the University’s outreach mission and scholarships.

Scholarships accounted for about a third of the total.

Although this disbursement didn’t completely comprise of returns on endowment investments, Youngerman said they made a sizable portion.

If it weren’t for the $5 million donation of University of Minnesota Regent Dave Larson to the foundation, Cori Nesmith would have to pay back loans for a long time after graduating.

The scholarship she receives is provided mostly to middle-class students so they can graduate with little or no debt.

“[Larson] just wants to encourage people to do what you want to do,” said the music therapy freshman and Larson scholar. “He doesn’t want any of his scholars to be brought down by student loans.”

Although the national trend during fiscal year 2012 wasn’t ideal, Griswold said the future could be brighter.

Based on initial talks with clients and a stronger stock market toward the end of the calendar year, he said he expects most endowments to currently be up around 10 percent in the first half of fiscal year 2013.

Still, he said there doesn’t necessarily seem to be a long-term, upward economic trend.

“There’s certainly no guarantee.”