University Times

Pitt’s endowment ranked 28th largest among 850 institutions surveyed in the 2010 National Association of College and University Business Officers (NACUBO)-Commonfund Study of Endowments, released last week. The endowment ranked seventh among public universities.

Pitt’s endowment value is recovering after declining 21.3 percent in fiscal year 2009. According to the survey, the endowment’s FY10 market value (for the year ended June 30, 2010), stood at more than $2.03 billion.

That represents an increase of 10.6 percent compared with nearly $1.84 billion at the end of the prior fiscal year.

Although Pitt’s FY09 endowment value fell from $2.33 billion at the end of FY08, it ranked 27th-largest among the 842 institutions surveyed in the 2009 study.

Factors that influence the size of the endowment include investment gains or losses as well as the effects of gifts and contributions, withdrawals and expenses.

Pitt’s increase was the result of several familiar factors, said John Fedele, associate director of news. “We’re in a capital campaign and we’ve got very generous donors who contribute to the endowment, as well as the return on our investments. We don’t swing for the fences in our investments, because that also leads to a lot of strikeouts. What we try to do is consistently hit singles and doubles and, over time, that provides a steady, successful but conservative return,” Fedele said.

“Because of this strategy, in any one year you wouldn’t expect to see us in the top performers, but we’ve been in the top quartile of college and university endowment performance over the past five years.”

The FY10 survey showed investment returns averaged 11.9 percent, a distinct improvement over FY09, in which the average return was -18.7 percent. Pitt’s FY10 investment returns were slightly above the average at 12.52 percent.

In a joint statement, John D. Walda, NACUBO president and chief executive officer, and John S. Griswold, Commonfund Institute executive director, stated: “After a strong first half of FY2011, we are hopeful that good results in FY2010 can be repeated for the current fiscal year and thus return endowments to the solid footing needed to support the long-term missions of the institutions they support.” However, they cautioned that average three-, five- and 10-year returns remained below the level needed to fund missions for the long term after accounting for spending, inflation and expenses. The 2010 survey found three-year net returns averaged -4.2 percent, while five-year returns averaged 3 percent and 10-year returns averaged 3.4 percent.

Average endowment spending was 4.5 percent in FY10, up from 4.4 percent in the prior year. The survey found that the average public university endowment spending rate rose to 4.3 percent, up from 3.7 percent in FY09.

The spending rate represents the percentage of the beginning market value of the endowment that is withdrawn to cover institutional expenditures, net of investment fees or any management expenses.

Using that formula, Pitt’s spending rate would be 5.6 percent, Fedele said. However, Pitt’s actual endowment spending formula distributes 4.25 percent using a three-year trailing average with a guaranteed floor. “That means that we take the market value of our portfolio on Dec. 31 for the previous three years, add those figures together and divide by three. We take that number and multiply it by 4.25 percent. If that amount is less than what we spent the previous year, we invoke the floor to bring the total up to match that year’s dollar figure, so that we have a consistent source of funds in the budget,” he said.

The study is available at www.nacubo.org/Research.html.

—Kimberly K. Barlow