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February 5, 2009

Pitt's FY08 endowment outperforms national average

Pitt showed a better-than-average growth in the market value of its endowment last year compared to other schools surveyed in the annual National Association of University Business Officers (NACUBO) Endowment Study, but the picture was bleak all around.

The 791 colleges and universities in the survey averaged growth of 0.5 percent in their endowment values as of the June 30 end of fiscal year 2008.

Pitt’s endowment value grew 3.5 percent, rising from $2.25 billion to $2.33 billion between FY07 and FY08, according to NACUBO. (Due to differences in reporting, Pitt’s NACUBO study endowment value is lower than the figures stated on the University’s FY08 consolidated balance sheet, according to Pitt officials.)

The growth results are a far cry from just a year earlier, when Pitt’s endowment gained 25 percent in value — largely due to investment gains — and its counterparts averaged 18.4 percent growth.

The NACUBO figures do not represent investment returns alone, but also reflect the impact of gifts, expenditures and withdrawals on the fund values.

The University touted FY08 as its best fundraising year ever. In the midst of a $2 billion “Building Our Future Together” capital campaign, the University raised $183 million in gifts and pledges including $126.8 million in actual cash received from donors, according to a campaign update.

Institutional Advancement reported that the endowment distributed nearly $85 million during FY08 in spite of gaining no investment returns during the year.

According to the NACUBO survey released last month, Pitt stood at No. 29 in endowment size, falling one place from its prior-year ranking. Topping the list was Harvard, which ended FY08 with an endowment of more than $36.5 billion. A half-dozen schools had endowments worth more than $10 billion each.

The fiscal year-end came too soon for the NACUBO study to reflect the turbulent market conditions that caused double-digit losses later in 2008. A follow-up study of 435 institutions by NACUBO in conjunction with nonprofit investment fund manager Commonfund found that investment losses contributed to an additional estimated 22.5 percent decrease in endowment values during the first five months of FY09 for an overall decline of about $94.5 billion in endowment assets.

The survey also found some of the responding institutions have implemented or plan to implement budget cuts, hiring freezes and other cost reductions in the wake of the poor market conditions.

Chancellor Mark A. Nordenberg, in a December University Update, said that Pitt’s endowment had lost an estimated 22 percent of its value in the midst of the wild market fluctuations.

NACUBO analysts noted that while losses to college and university endowments have been severe, higher education institutions generally outperformed the Standard and Poor’s 500 Index, which fell 13.3 percent during FY08 and dropped another 29.3 percent between July and November 2008.

In spite of the poor market results, 60 percent of institutions in the follow-up study plan no changes in their endowment withdrawal amounts during the rest of FY09. Nearly 27 percent planned to decrease their draw, 1 percent intend to increase their draw and nearly 12 percent were unsure.

Pitt’s Board of Trustees has maintained endowment distributions at 4.25 percent since FY97. The board’s investment committee reviews the spending policy each March.

The distribution amount is based on a three-year trailing average of the endowment’s value to help smooth the effects of market fluctuations. The distribution also has a “floor” that guarantees the endowment will not distribute less money than it did in the previous year.

—Kimberly K. Barlow

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