University Times

Pitt ranked No. 26 nationally in endowment value at the end of fiscal year 2011, according to the most recent National Association of College and University Business Officers (NACUBO)-Commonfund Study of Endowments.

The previous year, Pitt’s endowment ranked No. 28 among 850 schools.

The annual study, which included data from 823 institutions in FY11, showed Pitt’s endowment grew 24.3 percent, rising from its FY10 total of $2.03 billion to nearly $2.53 billion. The increase is not a measure of investment returns, but reflects the net impact of investment gains and losses as well as gifts and contributions, withdrawals and payment of management and investment fees.

According to the University’s FY11 audited financial report, the endowment’s investment return was 22.4 percent. (See Sept. 29, 2011, University Times.) In his Jan. 6 University Update, Chancellor Mark A. Nordenberg credited those investment returns and $114 million in donor support for the bulk of the endowment’s growth last year.

Harvard led the NACUBO-Commonfund FY11 list with an endowment valued at $31.7 billion. Its value rose 15.1 percent over its FY10 mark of nearly $27.6 billion.

In the FY11 study, among Pennsylvania schools, Pitt ranked second only to No. 11, the University of Pennsylvania. Penn saw a 16.1 percent increase in its endowment value, rising from $5.67 billion in FY10 to nearly $6.6 billion in FY11.

Among other local and state institutions, Penn State ranked No. 39 nationwide, rising 26.1 percent over its FY10 endowment of just under $1.37 billion to nearly $1.73 billion.

Carnegie Mellon’s endowment increased in value by 24.8 percent, rising from $815.1 million a year ago to just over $1 billion. It ranked No. 72 nationally.

Temple ranked No. 223, up 19.2 percent over its $235.5 million FY10 endowment to $280.7 million.

Chatham ranked No. 486, rising 24.5 percent from $58.5 million in FY10 to $72.9 million.

Commenting on the study results, NACUBO president and chief executive officer John D. Walda and Commonfund Institute executive director John S. Griswold said in a joint statement, “Fiscal 2011 was marked by favorable financial markets that benefited higher education endowments,” noting that average returns were almost 20 percent.

“However, we should note that fiscal 2011 closed before equity markets encountered headwinds and high volatility beginning in July 2011 caused by concerns about the debt crisis in Europe, the stubbornly high U.S. unemployment rate and much slower growth in the U.S. economy. Endowments very certainly were stressed by these factors during the latter part of calendar year 2011,” they stated.

Walda and Griswold further expressed concern that longer-term returns still lag below the level needed to cover annual spending, inflation and investment management costs.

Study participants’ effective spending rate averaged 4.6 percent in FY11. Adding inflation and costs totaling roughly 3-4 percent, an average annual return of 8-9 percent is necessary just to stay even, Walda and Griswold said. “But with 10-year returns averaging just 5.6 percent, higher returns will be necessary to maintain endowment values over the long term.”

According to NACUBO-Commonfund, the 823 institutions’ endowments returned an average of 19.2 percent (net of fees) for FY11, a marked improvement over the average 11.9 percent return reported for FY10 and a continuation of the recovery from the -18.7 percent return in FY09, when the financial crisis and slide in equity markets negatively affected educational endowments. Over the medium term, returns remained below the average inflation-adjusted spending rates of educational institutions, indicating that the damage inflicted by the downturn is still being felt by endowments, the survey sponsors stated.

Details of the endowment survey are at www.nacubo.org.

—Kimberly K. Barlow