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February 7, 2013

Endowment growth, returns outpace average

While most university endowments returned flat results last year, Pitt outpaced the national average with returns of 2.7 percent.

In addition, the endowment grew 3.6 percent to stand at nearly $2.62 billion at the end of fiscal year 2012, up from almost $2.53 billion at the end of FY11.

That increase placed Pitt’s endowment at No. 25 among more than 800 schools ranked in the recently released 2012 National Association of College and University Business Officers (NACUBO)-Commonfund Study of Endowments. Last year, Pitt’s endowment was 26th-largest in the annual survey.

Growth in the endowment reflects the impact of investment gains and losses, donors’ gifts and contributions, withdrawals and management and investment fees.

Arthur G. Ramicone, Pitt’s chief financial officer, attributed the growth in Pitt’s endowment mainly to gifts and transfers. In addition to response to the “Building Our Future Together” campaign, which surpassed its $2 billion fundraising goal in 2012 (see Oct. 25 University Times), Ramicone said the University moved some of its own money — for instance, through schools setting up endowments and the University moving money from operating investments in search of better returns.

Harvard continued in its No. 1 ranking, despite falling 4.1 percent in value from FY11. Its endowment stood at more than $30.4 billion, according to the NACUBO study, far ahead of No. 2 Yale, which held more than $19.3 billion in endowment funds.

Average returns held flat

The University’s endowment returns outpaced the average both overall and among institutions with endowment assets of more than $1 billion.

In a joint statement, NACUBO president and chief executive officer John D. Walda and Commonfund Institute executive director John S. Griswold said, “Over the years, with the exception of periods such as the recent economic crisis, institutions with the largest endowments have reported the highest one-year returns,” a trend that held true in the FY12 data.

“We attribute this outperformance to a number of factors: well diversified portfolios with an equity bias, the ability to make long-term commitments to less liquid strategies, access to top-tier investment managers and greater resources, including larger staffs, leading-edge technology and experienced investment committees.”

Pitt’s endowment returned 2.7 percent in FY12 (see Sept. 27 University Times) in a year when the average institution’s returns were flat. The 2012 NACUBO-Commonfund study found the institutions’ endowments returned an average of -0.3 percent in FY12 — down sharply from the average return of 19.2 percent in FY11.

Even the institutions with the largest endowments, those with more than $1 billion in assets, averaged returns of only 0.8 percent.

Ramicone said this year’s returns were the result of outperformance by investment managers who beat the benchmarks. He said Pitt’s investment strategies tend to be “a little more conservative overall,” adding, “We don’t go into funds that employ a lot of leverage,” which can magnify gains, but also magnify losses.

The endowment’s performance has remained “solidly positive” in the current fiscal year, which ends June 30, Ramicone said.

Nearby schools’ growth

In the state, Pitt ranked second only to the University of Pennsylvania in endowment size. Penn’s endowment grew 2.6 percent to stand at $6.75 billion in FY12, 11th-largest in the study overall.

Among other Pennsylvania institutions, Penn State ranked No. 36 nationwide, rising 3.2 percent to nearly $1.78 billion.

Swarthmore ranked No. 47 overall with nearly $1.5 billion. Its endowment value fell 0.6 percent from FY11.

Lehigh ranked No. 69 with nearly $1.04 billion. Its endowment value dropped 3.9 percent from the prior fiscal year.

Carnegie Mellon’s endowment decreased 3 percent, falling to $987 million. It ranked No. 72 nationally.

Temple ranked No. 223. Its endowment value fell 1.2 percent to $277.5 million.

Duquesne ranked No. 290. Its endowment grew 3.6 percent to $177.2 million.

Chatham ranked No. 482. Its endowment fell 3.5 percent to nearly $70.4 million.

Robert Morris ranked No. 693. Its endowment fell 2.7 percent to just under $26.5 million.

LaRoche College ranked No. 832 with $4.4 million in endowment funds, up 0.7 percent from FY11.

Details from the study can be found at

—Kimberly K. Barlow

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