Endowment growth at NU tops peers’

Tina Peng

Northwestern’s endowment growth last fiscal year was in the top 25 percent of all endowment growths, according to William McLean, NU’s vice president and chief investment officer.

A survey released last week by the Commonfund Institute reported that endowments at colleges and other educational institutions grew by an average of 14.7 percent between September 2003 and June 2004. By comparison, NU’s endowment, worth $3.7 billion last November, grew by 19.3 percent during that period.

This was the endowment’s second year of growth after a period of decline.

During the 2002-03 fiscal year, the endowment grew 8.1 percent. McLean said last year’s growth was unusual.

“I would say it was a good year in the markets and that helped,” McLean said. “Obviously it was a better than average year, and we don’t expect every year to be 19.3 (percent) by any means.”

An endowment is the sum of a university’s financial investments and goes toward funding financial aid, university maintenance and additional investments.

Despite last year’s increases, university spending this fiscal year will be “flat, relative to the previous year,” McLean said.

“Beginning in September 2005, when the next fiscal year starts, you should see a spending increase because we’ve had two good years,” he said.

Eugene Sunshine, senior vice president for business and finance, said university officials still are formulating the budget for the 2004-05 fiscal year, but he predicted that NU will spend a “sizable amount more” money than last year on research administration. This will ensure that university experiments are in compliance with the rules and regulations of the funding agencies.

“As the research enterprises of the university grow, the research infrastructure continues to grow,” Sunshine said.

“It’s an ongoing phenomena, a multiyear effort to bring the university up to the level it needs to be in terms of research administration,” he said.

NU will probably also spend more money in subsequent years on healthcare benefits and salary increases, Sunshine said.

The endowment’s growth partially can be attributed to a change in the way NU invests its money, McLean said. He added that in 2002 the university hired active managers to invest some money in the stock market.

This year, active managers handled half of the endowment and saw their investments grow several percentage points, McLean said.

“The previous administration was mostly passive, and active management has added some value, so that’s been a positive change,” McLean said.

Other strong earners included “real assets,” such as investments in energy and timber and international stocks, McLean said.

NU’s endowment is dwarfed by Harvard University’s $22.6 billion, according to The Harvard Crimson.

McLean said Yale’s endowment is second to Harvard’s and is only half the size, at $12.7 billion.

“Nobody’s really got what Harvard does,” he said.

“Obviously we want to have the most resources available to afford the most scholarships, the best professors, the most facilities, and more’s better than less,” McLean said. “The more we have, the better we are able to compete with our peers.”

Reach Tina Peng at [email protected].