A recent study by the National Association of College and University Business Officers found that the University's $3.2 billion endowment greatly exceeds the average college or university endowment of approximately $361 million, in part due to the University's investment of endowed funds. The University ranked 20th out of 746 colleges and universities that participated in the 2005 study.
In fiscal year 2005, the University's endowment increased by 15.2 percent, according to NACUBO.
"The 15 percent is the net change of all contributing factors," said Yoke San Reynolds, University vice president and chief financial officer. "In addition to performance and appreciation, there are also additions and divestments from the endowments."
The University's strong endowment growth is due to investment strategies as well as good investment managers, Reynolds said.
"We have a large proportion in hedge funds -- they have done well for us," Reynolds said.
Schools with large investments such as the University can develop more sophisticated investment strategies than smaller schools, which tend to invest primarily in equities or in fixed income accounts, Reynolds said.
The University's investments are overseen by the University Investment Management Company, which provides investment management to the University's Rector and Board of Visitors.
The University's biggest change to its investment strategy in 2006 involves removing 12.5 percent of investments from hedge funds and adding 10 percent of investments to public equities, a change spurred by more reasonable prices in public equity markets, according to the Investment Management Company's fiscal year 2005 report.
Colleges and universities with growth rates closer to the national average are still benefiting from their investments, according to NACUBO. On average, schools use five percent of their endowment funds on educational spending and one percent on operational management funding. The remaining 3.3 percent of the return rate is adequate to counteract inflation, which rises approximately 3 percent each year, NACUBO's report stated.
The success of institutions' endowment funds is crucial to their overall success, according to the NACUBO press release, as colleges get the majority of their funding from only three sources: private funding, public funding and tuition fees.
"Endowment income is an increasingly vital funding element of many college and university budgets and will undoubtedly remain so for the foreseeable future," NACUBO President James E. Morley Jr. stated in NACUBO's press release.
NACUBO representatives were unavailable for comment.
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