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User:LavaBaron/endowment

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A university endowment is a financial endowment held by a university or college.

Overview edit

Background edit

While many universities around the world have endowed funds, the practice of institutions of higher education holding large investment portfolios is best-known in the United States.[1] Generally, a university will spend a portion of the returns generated from each year from its endowment investments, while reinvesting the remainder back into the endowment to help its continued growth. Funds from endowments are used to attract "world class" professors and subject experts who might demand salaries in excess of that customarily budgeted for instructional staff, to finance specialized research projects, to fund doctoral study, and for other purposes.[2]

Support and criticism edit

Support edit

Large endowments have the benefit of freeing universities from cyclical government spending, insulating them from economic downturns and helping establish their independence from the state.[3]

Jonathan Wolf, dean of arts and humanities at University College London has applauded American-style endowments while criticizing the lack of substantial endowments at British universities:


Sophie Moullin, a former policy advisor to Gordon Brown, meanwhile, has said that "many advantages offered by top US universities come down to their wealth", including an ability to recruit top academics and fund innovative research, while Stephen Blyth, a fellow at Christ's College, Cambridge, believes that the ability of elite United States universities to provide financial aid to British undergraduate students is leading to an "emigration of talent" from Britain, noting that a single recent fundraising campaign by Stanford University raised more money from alumni than "the value of the entire Cambridge University endowment (age, 804 years)".

Criticism edit

Critics of endowments point to the amount of money universities pay to their financial management firms, the use of endowed funds to finance specific projects instead of lowering student tuition, and conservative spending practices among universities that see the bulk of return used to grow endowments themselves as part of an endowment "arms race" rather than for direct institutional support.

Endowments by nation edit

Brazil edit

As of 2014, eight universities in Brazil were in the process of establishing endowments.[4]

Finland edit

Aalto University had an endowment of about €1 billion in 2015, which had an average annual return on investment of 4.7-percent since the fund's inception.[5] The endowment was established in 2010 with a mix of private donations and a substantial, one-time grant from the Finnish government.[6]

France edit

According to the New York Times, "the practice in the United States of private endowments providing a large chunk of college budgets is seen as strange in France".[7] Nonetheless, in 2011, the French government awarded the University of Bordeaux, the University of Strasbourg, and the University of Paris endowments of US$1.3 billion each, as part of a scheme to create a French-equivalent of the Ivy League, colloquially known as the "Sorbonne League".[8]

 
The National University of Singapore is one of the most well-endowed universities outside the United States.

Germany edit

Endowments are rare among German universities; Goethe University is in the process of establishing one which, it says, will provide "considerable freedom from state control when it comes to the details of how a modern university should be run, including the appointing of professors".[9]

Hong Kong edit

Hong Kong University established an endowment fund in 1996 and began concentrated fundraising in 1999. In 2007 it received a gift of $128 million from Li Ka-shing.[10]

Japan edit

As of 2015, the total value of all endowed funds held by Japanese universities was approximately $84 billion, though most of it was held in no- or low-yield investments such as cash or government bonds.[11]

Saudi Arabia edit

As part of an effort to "initiate world-class research in Saudi Arabia", King Abdullah endowed the King Abdullah University with $10 billion in 2008.[12] This amount was subsequently augmented by a further $10 billion.

Singapore edit

The National University of Singapore has one of the largest endowments outside the United States, valued at $1.5 billion.[13]

United Kingdom edit

As of 2004, the average size of a university endowment in the United Kingdom was $22.5 million. The same year, the University of Cambridge had the largest endowment of any university in the UK, valued at $7.4 billion. Since the late 2000s, Cambridge and the University of Oxford have "adopted U.S. methods of managing their endowments". From 2005 to 2010, Oxford increased its full-time fundraising staff from 35 to 80 employees.[14][15]

United States edit

Overview edit

As of 2014, American colleges and universities held more than $500 billion of invested wealth, typically a combination of stocks, bonds, commodities, and cash, but excluding operating assets such as campus buildings, real estate, and equipment. During the preceding ten-year period these investments were growing at an average rate of annualized return of approximately 15.5-percent; roughly one-third of that growth was being used by universities for budget and spending purposes with the remainder being reinvested into the endowments themselves.[16]

In 2012 the average endowment size of an American university was $488 million. As of 2015, Harvard University had the largest university endowment in the United States, valued at more than $36 billion, while the University of Nebraska at Kearney had the smallest, valued at just over $65,000.[17]

Composition and funding edit

University endowments in the United States typically do not consist of a single fund. Rather, an institution may have hundreds or thousands of separate endowment funds, many of which are earmarked for specific purposes (as of 2008, about 55-percent of all university endowment funds in the United States were donor-restricted for spending on specific items, such as maintenance of a professorship, underwriting a particular type of research, or financing scholarships for specific classes of students).[18]

Endowments are usually raised by American universities through annual fundraising appeals to alumni and community members, though bequests and single large gifts by wealthy benefactors are also common.

"Endowment culture" edit

Several factors have been attributed to the growth of an "endowment culture" in the United States: (1) a favorable income tax regime that exempts from taxation personal income donated to non-profit entities, (2) a historically significant focus of American universities on "generating a sense of community amongst their alumni", and, (3) aggressive and professional fundraising departments maintained by colleges and universities.[19]

Largest university endowments edit

Listed below are the world's 15 largest university endowments as of 2015. Blue bands indicate state-owned universities while red bands indicate private universities.

University Country Year Founded Endowment Students Endowment, Per
Capita by Student 		QS Ranking
 
Harvard University 		  United States 1636 $36.449 21,000 $1,733,000 2
 
Yale University 		  United States 1701 $25.572 12,312 $2,076,998 15
 
UT System 		  United States 1876 $24.083 200,086 $120,363 77
 
Princeton University 		  United States 1746 $22.723 8,088 $2,809,470 11
 
Stanford University 		  United States 1891 $22.223 15,877 $1,399,697 3
 
King Abdullah University 		  Saudi Arabia 2009 $20.000 1,200 $16,666,666 not ranked
 
MIT 		  United States 1861 $13.475 11,319 $1,190,476 1
 
Texas A&M System 		  United States 1948 $10.477 143,000 $73,268 159
 
Northwestern University 		  United States 1851 $10.193 20,955 $486,423 32
 
University of Pennsylvania 		  United States 1740 $10.134 24,876 18
 
University of Michigan 		  United States 30
 
Columbia University 		  United States 22
 
Notre Dame 		  United States 195
 
University of Cambridge 		  United Kingdom 1209 $8.100 19,515 $415,065 3
 
UC System 		  United States 26 (UC Berkeley)

References edit

  1. ^ Hsiu-Ling, Lee (September 2008). "The growth and stratification of college endowments in the United States". International Journal of Educational Advancement. 8 (3): 136–151.
  2. ^ "How Universities Spend Endowments". New York Times. 25 August 2015. Retrieved 19 July 2016.
  3. ^ Salmi, Jamil (2009). The Challenge of Establishing World-class Universities. World Bank. pp. 23–25. ISBN 0821378767.
  4. ^ "Brazilian universities establish endowment funds". Agencia FAPESP. 26 February 2014. Retrieved 19 July 2016.
  5. ^ "Aalto University Endowment portfolio returns 6.3% in 2014". aalto.fi. Aalto University. Retrieved 19 July 2016.
  6. ^ Mira Network AB. "Aalto AlumniNET".
  7. ^ "Higher Learning in France Clings to Its Old Ways". New York Times. 12 May 2006. Retrieved 18 July 2016.
  8. ^ "A French Ivy League". Inside Higher Ed. 7 October 2011. Retrieved 18 July 2016.
  9. ^ "About the University". goethe-university-frankfurt.de. Goethe University. Retrieved 18 July 2016.
  10. ^ "Universities need to plan better for future funds". South China Morning Post. 26 March 2007. Retrieved 19 July 2016.
  11. ^ Warnock, Eleanor (6 April 2015). "Japanese Universities Look to Get Schooled in Investing". Wall Street Journal. Retrieved 19 July 2016.
  12. ^ Choi, Charles (1 February 2008). "Arabian Brainpower". Scientific-American. Retrieved 19 July 2016.
  13. ^ Usher, Alex. "University Endowments in a Global Context". higheredstrategy.com. Higher Education Strategy Associates. Retrieved 18 July 2016.
  14. ^ Gutenplan, D.D. (5 November 2010). "In Europe, Fund-Raising Lessons From Americans". New York Times. Retrieved 18 July 2016.
  15. ^ "The lolly and the Ivies". The Economist. 7 February 2015. Retrieved 18 July 2016.
  16. ^ Sherlock, Molly (2015). College and University Endowments: Overview and Tax Policy Options (PDF). Congressional Research Service.
  17. ^ "10 Universities With the Largest Endowments". U.S. News and World Report. 6 October 2015. Retrieved 18 July 2016.
  18. ^ "The Truth Behind Endowment Myths". aau.edu. American Association of Universities. Retrieved 18 July 2016.
  19. ^ "University Endowments – A UK /US Comparison" (PDF). suttontrust.com. Sutton Trust. Retrieved 18 July 2016.
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