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Harvard's is $1.3 million per student. Stanford's is $850,000 per student. Overall, there are 56 university endowments of $1 billion or more.
My alma mater's is squat per student, but I think that I got a reasonably good education.
I wonder what kind of impact these huge endowments will have?
My alma mater's is squat per student, but I think that I got a reasonably good education.
I wonder what kind of impact these huge endowments will have?
Venture-Capital Bets Swell
Stanford's Endowment
Alternative Investments Give
Wealthy Schools an Edge;
Trinity Can't Afford the Risk
By JOHN HECHINGER
Staff Reporter of THE WALL STREET JOURNAL
January 23, 2006; Page A1
Stanford University's endowment, boosted by deep ties to Silicon Valley, vaulted past those of Princeton University and the University of Texas system last year, as fat investment gains at the nation's richest colleges far outstripped what they received in gifts from alumni and other donors.
Though Stanford's endowment ranked No. 3 -- after Harvard and Yale -- the Palo Alto, Calif., school had the fastest-growing investment pool among the nation's 10 wealthiest universities. Its endowment rose 23%, including donations and after spending on programs, to $12.2 billion in the year ended Aug. 31, according to an annual survey to be released today by the National Association of College and University Business Officers. (Fiscal years at most other schools end June 30.)
Last year, Stanford benefited in particular from investments in top-tier private venture-capital funds and other types of alternative investments that are often out of reach for less-affluent schools. A chunk of its gains came from soaring shares of Google Inc., which it owned through investments in funds run by venture-capital firms Kleiner Perkins Caulfield & Byers and Sequoia Capital, the Web-search giant's main backers.
Stanford's achievement illustrates a great divide in higher education that may only grow wider. Elite schools, already among the nation's richest charitable institutions, are now increasingly able to pair stellar investment returns and wealthy alumni to build war chests that enable them to hire away top professors and give the most generous financial-aid packages to coveted students. The big risk: The college education available to most in the U.S. could end up weaker, especially in relative terms.
Colleges and universities use endowments -- funds that include donations and investment gains on those gifts -- to support their operating budgets and to pay for special programs.
The institutions, once fusty in their choice of plain-vanilla stocks and bonds, are increasingly using their market clout and alumni connections to gain access to these less traditional and potentially more lucrative types of investments. Stanford was far from the only beneficiary of the trend last year. In a lackluster market, some Ivy League and other elite schools saw their endowments post investment returns in the high double digits -- at times doubling the returns of rank-and-file institutions. The disparity has frustrated some of the schools frozen out of the best deals.
Alumni gifts helped Stanford's endowment rise from fifth place in the previous year. The university just completed a fund-raising campaign that fetched $1.1 billion over five years. Leaders of the campaign included such Silicon Valley luminaries as Jerry Yang -- Stanford class of 1990 and a founder of Yahoo Inc. Last year, $236 million in gifts flowed into the endowment.
But a far bigger pop came from Stanford's investment returns, which added $2.27 billion. Stanford doesn't disclose the precise percentage returns on investments for its fiscal years ended Aug. 31. But for the 12 months ended June 30, the return was 19.5%, more than three times as much as the broader stock market, as measured by the Standard & Poor's 500-stock index.
Randall Livingston, Stanford's chief financial officer, says the school was early in investing in first-tier Silicon Valley venture-capital funds, which take stakes in start-up businesses in hopes of profiting when the companies launch initial public offerings of stock or are acquired by other companies. The school also credited successful investments in foreign markets, real estate and energy -- all stellar performers last year.
Stanford's endowment -- and the investment-return figure -- doesn't include another $336 million the school made from selling Google stock it received in exchange for the right to use its Internet-search technology, which Google's founders developed while graduate students at Stanford. That money will be held separately, to finance research and education initiatives.
"We were blessed," Mr. Livingston says. Stanford, Harvard, Yale, the Massachusetts Institute of Technology and a handful of other schools with big endowments have been investing in venture-capital funds for a decade or longer -- compared with only a few years at less-affluent schools, Mr. Livingston says, and they "were early players in those funds. Now many are oversubscribed."
The endowment survey, done with financial firm TIAA-CREF, found that the average endowment generated a 9.3% return in the year ended June 30. That was no small achievement in a period when the S&P 500 index, including dividends, returned only 6.3%, and U.S. bonds fared only a bit better.
But endowments with more than $1 billion returned an average of 13.8%. In the 10 years ended June 30, the supersize endowments returned an average annual 12%, beating the S&P 500 by a full two percentage points. The reason was clear: The big funds had more than a third of their savings in lightly regulated hedge funds, venture-capital, private-equity and other alternative investments. Smaller funds tended to have only a smattering of these more unusual investments.
John S. Griswold, executive director of the Commonfund Institute, which provides investment management for colleges and other nonprofits, says he doesn't recall another year with such great disparities between the returns of less-affluent schools and elite universities.
The reason: Schools with smaller endowments just don't have the money and clout to get into many of the first-tier funds, which often have investment minimums in the tens of millions of dollars.
Early Reese, vice president of finance and treasurer at Trinity College in Connecticut, says his school, with its $379 million endowment, can't afford the risk of putting $100 million or so in a top-flight venture fund. For its 2005 fiscal year, Trinity achieved an 8.8% return with a portfolio 70% invested in traditional stocks and bonds. Mr. Reese says the school hopes to move its endowment into the billion-dollar range through fund raising, in part so it can increase its level of alternative investments. "Would we ever catch up?" he says. "I don't think so."
Even a slight delay in getting into high-yielding venture-capital funds has made a big difference in recent years. For the year ended June 30, Princeton reported a 17% investment return, with its heavy investments in private equity, hedge funds and other alternative assets. Christopher McCrudden, Princeton's treasurer, says Stanford preceded Princeton in investing in venture-capital firms with a big position in Google, a reason for its bigger returns. He says Princeton entered the arena in the mid-1990s. "We were a little slower getting into that kind of portfolio," he says.
Not all the richest schools flourished last year. Atlanta-based Emory University, which owes its wealth to stock in hometown Coca-Cola Co., returned only 6.8% in the year ended June 30 because of the shares' poor performance. Emory, whose $4.38 billion endowment now ranks No. 11, down from No. 8 in 2004, started the year with about 35% of its endowment in Coke, an unusually concentrated position.
Mary Cahill, Emory's chief investment officer, says the school has cut the stake to 10% to diversify the endowment. As it has sold off stock over the years, she says, the fund has sought to buy more alternative investments.
In the year ended June 30, Harvard's endowment, the richest, at $25.47 billion by the new tally, returned 19.2% -- and 16.1% annually over the past decade. (Harvard says its endowment actually totals $25.9 billion, a figure that includes pledged money.) Yale, with its $15.22 billion endowment, posted a return of 22.3% last year -- and 17.4% over 10 years.
Harvard and Yale also benefited from venture funds with Google gains. But with their bigger endowments, Google may have made less of a difference to their returns. The two schools, which also have big holdings in commodities, real estate, oil and international stocks and bonds, declined to discuss details of their investments.
Of course, alternative investments -- like hot tech stocks in the 1990s -- could suffer their own reversals, so there's no guarantee schools that rely on them can maintain their edge. What's more, two of the schools have had to face issues of turnover in their investment management ranks. Jack Meyer, the endowment chief credited with Harvard's amazing run, recently left to start his own investment firm; Mike McCaffery, Stanford's endowment head for the past five years, plans to leave this year. Stanford's Mr. Livingston says the university expects "to sustain the positive performance we've had under Mike's leadership."
Last year, 56 endowments had $1 billion or more in investments, up from 47 in 2004. These billionaire schools increasingly face questions from alumni and others about what they are doing with their stashes at a time of skyrocketing tuitions. Stanford, for one, is considering offering a free ride to qualified students whose families earn less than $45,000 a year, matching similar programs at Yale and Harvard.
Stanford's Endowment
Alternative Investments Give
Wealthy Schools an Edge;
Trinity Can't Afford the Risk
By JOHN HECHINGER
Staff Reporter of THE WALL STREET JOURNAL
January 23, 2006; Page A1
Stanford University's endowment, boosted by deep ties to Silicon Valley, vaulted past those of Princeton University and the University of Texas system last year, as fat investment gains at the nation's richest colleges far outstripped what they received in gifts from alumni and other donors.
Though Stanford's endowment ranked No. 3 -- after Harvard and Yale -- the Palo Alto, Calif., school had the fastest-growing investment pool among the nation's 10 wealthiest universities. Its endowment rose 23%, including donations and after spending on programs, to $12.2 billion in the year ended Aug. 31, according to an annual survey to be released today by the National Association of College and University Business Officers. (Fiscal years at most other schools end June 30.)
Last year, Stanford benefited in particular from investments in top-tier private venture-capital funds and other types of alternative investments that are often out of reach for less-affluent schools. A chunk of its gains came from soaring shares of Google Inc., which it owned through investments in funds run by venture-capital firms Kleiner Perkins Caulfield & Byers and Sequoia Capital, the Web-search giant's main backers.
Stanford's achievement illustrates a great divide in higher education that may only grow wider. Elite schools, already among the nation's richest charitable institutions, are now increasingly able to pair stellar investment returns and wealthy alumni to build war chests that enable them to hire away top professors and give the most generous financial-aid packages to coveted students. The big risk: The college education available to most in the U.S. could end up weaker, especially in relative terms.
Colleges and universities use endowments -- funds that include donations and investment gains on those gifts -- to support their operating budgets and to pay for special programs.
The institutions, once fusty in their choice of plain-vanilla stocks and bonds, are increasingly using their market clout and alumni connections to gain access to these less traditional and potentially more lucrative types of investments. Stanford was far from the only beneficiary of the trend last year. In a lackluster market, some Ivy League and other elite schools saw their endowments post investment returns in the high double digits -- at times doubling the returns of rank-and-file institutions. The disparity has frustrated some of the schools frozen out of the best deals.
Alumni gifts helped Stanford's endowment rise from fifth place in the previous year. The university just completed a fund-raising campaign that fetched $1.1 billion over five years. Leaders of the campaign included such Silicon Valley luminaries as Jerry Yang -- Stanford class of 1990 and a founder of Yahoo Inc. Last year, $236 million in gifts flowed into the endowment.
But a far bigger pop came from Stanford's investment returns, which added $2.27 billion. Stanford doesn't disclose the precise percentage returns on investments for its fiscal years ended Aug. 31. But for the 12 months ended June 30, the return was 19.5%, more than three times as much as the broader stock market, as measured by the Standard & Poor's 500-stock index.
Randall Livingston, Stanford's chief financial officer, says the school was early in investing in first-tier Silicon Valley venture-capital funds, which take stakes in start-up businesses in hopes of profiting when the companies launch initial public offerings of stock or are acquired by other companies. The school also credited successful investments in foreign markets, real estate and energy -- all stellar performers last year.
Stanford's endowment -- and the investment-return figure -- doesn't include another $336 million the school made from selling Google stock it received in exchange for the right to use its Internet-search technology, which Google's founders developed while graduate students at Stanford. That money will be held separately, to finance research and education initiatives.
"We were blessed," Mr. Livingston says. Stanford, Harvard, Yale, the Massachusetts Institute of Technology and a handful of other schools with big endowments have been investing in venture-capital funds for a decade or longer -- compared with only a few years at less-affluent schools, Mr. Livingston says, and they "were early players in those funds. Now many are oversubscribed."
The endowment survey, done with financial firm TIAA-CREF, found that the average endowment generated a 9.3% return in the year ended June 30. That was no small achievement in a period when the S&P 500 index, including dividends, returned only 6.3%, and U.S. bonds fared only a bit better.
But endowments with more than $1 billion returned an average of 13.8%. In the 10 years ended June 30, the supersize endowments returned an average annual 12%, beating the S&P 500 by a full two percentage points. The reason was clear: The big funds had more than a third of their savings in lightly regulated hedge funds, venture-capital, private-equity and other alternative investments. Smaller funds tended to have only a smattering of these more unusual investments.
John S. Griswold, executive director of the Commonfund Institute, which provides investment management for colleges and other nonprofits, says he doesn't recall another year with such great disparities between the returns of less-affluent schools and elite universities.
The reason: Schools with smaller endowments just don't have the money and clout to get into many of the first-tier funds, which often have investment minimums in the tens of millions of dollars.
Early Reese, vice president of finance and treasurer at Trinity College in Connecticut, says his school, with its $379 million endowment, can't afford the risk of putting $100 million or so in a top-flight venture fund. For its 2005 fiscal year, Trinity achieved an 8.8% return with a portfolio 70% invested in traditional stocks and bonds. Mr. Reese says the school hopes to move its endowment into the billion-dollar range through fund raising, in part so it can increase its level of alternative investments. "Would we ever catch up?" he says. "I don't think so."
Even a slight delay in getting into high-yielding venture-capital funds has made a big difference in recent years. For the year ended June 30, Princeton reported a 17% investment return, with its heavy investments in private equity, hedge funds and other alternative assets. Christopher McCrudden, Princeton's treasurer, says Stanford preceded Princeton in investing in venture-capital firms with a big position in Google, a reason for its bigger returns. He says Princeton entered the arena in the mid-1990s. "We were a little slower getting into that kind of portfolio," he says.
Not all the richest schools flourished last year. Atlanta-based Emory University, which owes its wealth to stock in hometown Coca-Cola Co., returned only 6.8% in the year ended June 30 because of the shares' poor performance. Emory, whose $4.38 billion endowment now ranks No. 11, down from No. 8 in 2004, started the year with about 35% of its endowment in Coke, an unusually concentrated position.
Mary Cahill, Emory's chief investment officer, says the school has cut the stake to 10% to diversify the endowment. As it has sold off stock over the years, she says, the fund has sought to buy more alternative investments.
In the year ended June 30, Harvard's endowment, the richest, at $25.47 billion by the new tally, returned 19.2% -- and 16.1% annually over the past decade. (Harvard says its endowment actually totals $25.9 billion, a figure that includes pledged money.) Yale, with its $15.22 billion endowment, posted a return of 22.3% last year -- and 17.4% over 10 years.
Harvard and Yale also benefited from venture funds with Google gains. But with their bigger endowments, Google may have made less of a difference to their returns. The two schools, which also have big holdings in commodities, real estate, oil and international stocks and bonds, declined to discuss details of their investments.
Of course, alternative investments -- like hot tech stocks in the 1990s -- could suffer their own reversals, so there's no guarantee schools that rely on them can maintain their edge. What's more, two of the schools have had to face issues of turnover in their investment management ranks. Jack Meyer, the endowment chief credited with Harvard's amazing run, recently left to start his own investment firm; Mike McCaffery, Stanford's endowment head for the past five years, plans to leave this year. Stanford's Mr. Livingston says the university expects "to sustain the positive performance we've had under Mike's leadership."
Last year, 56 endowments had $1 billion or more in investments, up from 47 in 2004. These billionaire schools increasingly face questions from alumni and others about what they are doing with their stashes at a time of skyrocketing tuitions. Stanford, for one, is considering offering a free ride to qualified students whose families earn less than $45,000 a year, matching similar programs at Yale and Harvard.
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