User:LavaBaron/endowment

A university endowment is a financial endowment held by a university or college.

Overview

Background

While many universities around the world have endowed funds, the practice of institutions of higher education holding large investment portfolios is best-known in the United States.^[1] Generally, a university will spend a portion of the returns generated from each year from its endowment investments, while reinvesting the remainder back into the endowment to help its continued growth. Funds from endowments are used to attract "world class" professors and subject experts who might demand salaries in excess of that customarily budgeted for instructional staff, to finance specialized research projects, to fund doctoral study, and for other purposes.^[2]

Support and criticism

Support

Large endowments have the benefit of freeing universities from cyclical government spending, insulating them from economic downturns and helping establish their independence from the state.^[3]

Jonathan Wolf, dean of arts and humanities at University College London has applauded American-style endowments while criticizing the lack of substantial endowments at British universities:

“

A large endowment, relative to student numbers, gives extraordinary freedom. A scientist colleague of mine remembers her time in the US when, if she needed some equipment, she ordered it, whatever the cost. No forms, no waiting for months for approval, just a phone call.

”

Sophie Moullin, a former policy advisor to Gordon Brown, meanwhile, has said that "many advantages offered by top US universities come down to their wealth", including an ability to recruit top academics and fund innovative research, while Stephen Blyth, a fellow at Christ's College, Cambridge, believes that the ability of elite United States universities to provide financial aid to British undergraduate students is leading to an "emigration of talent" from Britain, noting that a single recent fundraising campaign by Stanford University raised more money from alumni than "the value of the entire Cambridge University endowment (age, 804 years)".

Criticism

Critics of endowments point to the amount of money universities pay to their financial management firms, the use of endowed funds to finance specific projects instead of lowering student tuition, and conservative spending practices among universities that see the bulk of return used to grow endowments themselves as part of an endowment "arms race" rather than for direct institutional support.

Endowments by nation

Brazil

As of 2014, eight universities in Brazil were in the process of establishing endowments.^[4]

Finland

Aalto University had an endowment of about €1 billion in 2015, which had an average annual return on investment of 4.7-percent since the fund's inception.^[5] The endowment was established in 2010 with a mix of private donations and a substantial, one-time grant from the Finnish government.^[6]

France

According to the New York Times, "the practice in the United States of private endowments providing a large chunk of college budgets is seen as strange in France".^[7] Nonetheless, in 2011, the French government awarded the University of Bordeaux, the University of Strasbourg, and the University of Paris endowments of US$1.3 billion each, as part of a scheme to create a French-equivalent of the Ivy League, colloquially known as the "Sorbonne League".^[8]

Germany

Endowments are rare among German universities; Goethe University is in the process of establishing one which, it says, will provide "considerable freedom from state control when it comes to the details of how a modern university should be run, including the appointing of professors".^[9]

Hong Kong

Hong Kong University established an endowment fund in 1996 and began concentrated fundraising in 1999. In 2007 it received a gift of $128 million from Li Ka-shing.^[10]

Japan

As of 2015, the total value of all endowed funds held by Japanese universities was approximately $84 billion, though most of it was held in no- or low-yield investments such as cash or government bonds.^[11]

Saudi Arabia

As part of an effort to "initiate world-class research in Saudi Arabia", King Abdullah endowed the King Abdullah University with $10 billion in 2008.^[12] This amount was subsequently augmented by a further $10 billion.

Singapore

The National University of Singapore has one of the largest endowments outside the United States, valued at $1.5 billion.^[13]

United Kingdom

As of 2004, the average size of a university endowment in the United Kingdom was $22.5 million. The same year, the University of Cambridge had the largest endowment of any university in the UK, valued at $7.4 billion. Since the late 2000s, Cambridge and the University of Oxford have "adopted U.S. methods of managing their endowments". From 2005 to 2010, Oxford increased its full-time fundraising staff from 35 to 80 employees.^[14]^[15]

United States

Overview

As of 2014, American colleges and universities held more than $500 billion of invested wealth, typically a combination of stocks, bonds, commodities, and cash, but excluding operating assets such as campus buildings, real estate, and equipment. During the preceding ten-year period these investments were growing at an average rate of annualized return of approximately 15.5-percent; roughly one-third of that growth was being used by universities for budget and spending purposes with the remainder being reinvested into the endowments themselves.^[16]

In 2012 the average endowment size of an American university was $488 million. As of 2015, Harvard University had the largest university endowment in the United States, valued at more than $36 billion, while the University of Nebraska at Kearney had the smallest, valued at just over $65,000.^[17]

Composition and funding

University endowments in the United States typically do not consist of a single fund. Rather, an institution may have hundreds or thousands of separate endowment funds, many of which are earmarked for specific purposes (as of 2008, about 55-percent of all university endowment funds in the United States were donor-restricted for spending on specific items, such as maintenance of a professorship, underwriting a particular type of research, or financing scholarships for specific classes of students).^[18]

Endowments are usually raised by American universities through annual fundraising appeals to alumni and community members, though bequests and single large gifts by wealthy benefactors are also common.

"Endowment culture"

Several factors have been attributed to the growth of an "endowment culture" in the United States: (1) a favorable income tax regime that exempts from taxation personal income donated to non-profit entities, (2) a historically significant focus of American universities on "generating a sense of community amongst their alumni", and, (3) aggressive and professional fundraising departments maintained by colleges and universities.^[19]

Largest university endowments

Listed below are the world's 15 largest university endowments as of 2015. Blue bands indicate state-owned universities while red bands indicate private universities.

University	Country	Year Founded	Endowment	Students	Endowment, Per Capita by Student	QS Ranking
Harvard University	United States	1636	$36.449	21,000	$1,733,000	2
Yale University	United States	1701	$25.572	12,312	$2,076,998	15
UT System	United States	1876	$24.083	200,086	$120,363	77
Princeton University	United States	1746	$22.723	8,088	$2,809,470	11
Stanford University	United States	1891	$22.223	15,877	$1,399,697	3
King Abdullah University	Saudi Arabia	2009	$20.000	1,200	$16,666,666	not ranked
MIT	United States	1861	$13.475	11,319	$1,190,476	1
Texas A&M System	United States	1948	$10.477	143,000	$73,268	159
Northwestern University	United States	1851	$10.193	20,955	$486,423	32
University of Pennsylvania	United States	1740	$10.134	24,876		18
University of Michigan	United States					30
Columbia University	United States					22
Notre Dame	United States					195
University of Cambridge	United Kingdom	1209	$8.100	19,515	$415,065	3
UC System	United States					26 (UC Berkeley)