Colleges see rebound in endowments
Tim Jarry of Holy Cross: “We're still making money, but it's going to be harder to do than it was in the past.”
Endowments at Central Massachusetts colleges have bounced back from the depths of the recession, but schools are still working to make up lost ground.
A booming stock market and low interest rates helped local endowments grow anywhere from 6.6 percent at Fitchburg State University to 19 percent at Worcester State University during the 2013 fiscal year, which ended June 30 of last year, according to data from the National Association of Colleges and University Business Officers (NACUBO).
But endowments at the College of the Holy Cross and Worcester Polytechnic Institute are still lagging at least $15 million behind pre-recession levels.
“Endowments have been treading water,” said Ken Redd, NACUBO's director of research and policy analysis. “Schools are still trying to recover.”
At places like Worcester State and Assumption College, though, endowments hit all-time highs, resulting in better programs and student support.
Back in 1997, Worcester State's endowment was $175,000, meaning the school could award just $15,000 in scholarships, said Tom McNamara, vice president for university affairs.
But by June 2013, the school's endowment reached $18.2 million and Worcester State was providing nearly $300,000 in scholarships, which McNamara said has made it easier for cash-strapped students to stay in school.
Worcester State has consistently invested 5 percent of its endowment into its budget, McNamara said.
Meanwhile, Assumption's endowment grew 48.4 percent since 2009 to $92.4 million, according to NACUBO.
That increase has allowed the school to introduce new programs in education, criminology and sports management, said President Francesco Cesareo, and avoid a tuition hike.
Assumption funds 2.6 percent of its operating budget through the endowment, slightly below the median of 3 percent for institutions with endowments of between $50 million and $100 million, according to NACUBO.
Wealthier institutions typically rely more on endowments to fund programs, according to NACUBO data.
Holy Cross — with a $634.9-million endowment as of June 2013 — supports 15 percent of its operating budget through the endowment, above the peer institute median of 6.8 percent, said Tim Jarry, school chief investment officer.
The lingering effects of the recession have prompted schools to both streamline endowment management and enter new markets. When Jarry took over in 2011, the school's endowment funds spread across 60 different managers, with some controlling a minuscule amount of money.
Now Holy Cross utilizes 35 managers — well below the peer institution average of 50.8, according to NACUBO. Its top five managers control 40 percent of the endowment.
Holy Cross also began managing up to 10 percent of its endowment internally through the use of exchange-traded funds (ETFs), a passive strategy that tracks and replicates a portion of the market. ETFs provide the school with low-cost exposure to different segments.
Chris McCarthy, Assumption's executive vice president for finance and administration, said the school has shifted more than 30 percent of its endowment over the past four years to multi-asset managers, who are allowed to invest across a wide variety of assets.
“They're in the markets every day, and we're not,” McCarthy said.
Worcester State's endowment grew 66.1 percent in four years. That's due in no small part to the school's recent shift in strategy from a 50-50 split between stocks and bonds to a 65-35 favoring stocks, McNamara said.
That allowed it to catch an upward swing in the stock markets. But as the market cools, McNamara anticipates adjusting to a 63-37 stocks-bonds split.
Rising interest rates stemming from anticipated cutbacks in Federal Reserve bond purchases will make it tough to replicate recent success, endowment managers indicated.
“Everything looks fairly valued or expensive to us,” Jarry said. “We're still making money, but it's going to be harder to do than it was in the past.”n
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