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Are Endowments Making a Rebound?

For more than a year, college endowments have been an investment train wreck, but things appear to be turning around.

Both Howard University and the United Negro College Fund have seen improvements in their portfolios tracking the better performance in stock markets since last spring.

“It’s looking better says,” says Ken Redd, director of research and policy analysis at the National Association of College and University Business Officers. A majority of endowment assets are in U.S. and foreign company stocks. U.S. stock markets have been up by about 35 percent in general since April.

“I can only speculate but since the Standard & Poor’s 500 index has been up 40 percent since April that my guess is that endowments are up in sympathy,” Redd says.

The S&P 500 index has gone from 680 in April to more than 1000 now. The Dow Jones Industrial Average, an index based on the stocks of 30 blue chip companies, has risen about 30 percent from 6,500 in March to more than 9,300 now.

Improving markets have helped Howard, according to Sidney Evans, the institution’s chief financial officer. He says that Howard’s endowment, which peaked at about $550 million in September 2007, fell to $375 million, its lowest point recently, in March. But since then, it has steadily gained ground and is now about $410 million, Evans says.

At the United Negro College Fund, endowments have seen a bump from stock’s upturn. Its endowment fell to a low of $65 million in March but is now $84 million, says Gerald Chen-Young, director of investments and portfolio manager for the fund. A separate endowment run with the Gates Foundation increased 5 percent from last September to $840 million today, Chen-Young says. And, like other managers, he says he has rebalanced his UNCF portfolio for more cash and fixed assets investments. Last winter he increased those safer categories from 31 percent of the total to 39 percent.

Typically, stock markets rise in anticipation of an economic recovery. A spate of good news, such as lower-than-expected joblessness, pepped up home and car sales and good news in Europe, has given currency to the idea that recovery is around the corner.

While Evans says he’s more optimistic about the economy, he cautions, “we’re not out of the recession.” 

Redd also says that while evidence points to a recovery, NACUBO has just started it latest study of how endowments are faring and it won’t be completed until January. What’s more, Redd says, endowments still have a ways to go to reach previous levels. “We’re still about 20 percent lower than where we were in the middle of 2008,” he says.


News of a possible recovery is good news since Historically Black Colleges and Universities have been especially hard hit. The nation’s 103 HBCUs typically have smaller endowments and less of a financial cushion in hard times.

Spelman College in Atlanta, for instance, has been hard hit by the stock market’s volatility. Although the college has a relatively strong financial position, it has taken steps to protect students loans. The downturn has prompted speculation that some  other HBCUs might have to close or merge to survive.

Meanwhile, college endowment officials are reconsidering their investment strategies after taking a beating in 2008-09. Redd says many learned the hard way that their schools might need immediate, protected funding for operations.

At Howard, for example, the university has reduced its exposure to volatile equities that have taken the biggest financial losses since the recession began in late 2007, Evans says. At the moment, the schools’ endowment is invested 20 percent in U.S. equities, 14 percent in global stocks and 3 percent in emerging market equities.

“We’ve been reducing equities so we can get into investments that are more liquid so we can have cash readily in an emergency,” Evans says.

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