In some countries, $6.5 billion is more than the net worth of the entire economy.
At Northwestern, it’s the approximate current size of the university’s endowment.
Though the endowment’s growth is still healthy, trouble in financial markets since the 2007 fiscal year ended in June has led to smaller returns in recent months, University President Henry Bienen said Thursday.
Also on Thursday, the National Association of College and University Business Officers released its annual National Endowment Study, chronicling the performance of college and university endowments.
NU’s had grown to $6.5 billion in fiscal year 2007, showing a return of 26.5 percent from fiscal year 2006’s $5.1 billion, the report said.
Bienen said he was pleased with the return on funds, but said that in the calendar year 2007’s totals, NU’s endowment posted a smaller, 13.7 percent gain from 2006.
“The benchmark that we used for other institutions’s long-term pools was 12.5 percent, so we outperformed the benchmark,” Bienen said. “For funds our size to outperform by 1 or 2 percent, that’s very significant.”
The 26.5-percent figure from the endowment study included other forms of income besides market performance, said Al Cubbage, vice president for university relations. “For whatever reason, it shows return on investment plus additions to the endowment,” he said. “It includes all gifts you receive to the endowment.”
The discrepancy came almost entirely from the recent market downturn, Bienen said. Since June, the endowment delivered returns of 2.6 percent. Recent market volatility has taken a greater toll.
“If we take January into effect, that 2.6 percent has disappeared and we will have a negative,” Bienen said. “They can’t get the numbers that quickly, but there’s no way it cannot be negative.”
Despite the recent downturn, Bienen was quick to note that the $700 million raised from the partial sale of royalty rights of NU’s blockbuster drug Lyrica was largely unaffected by the downturn.
“What we did with the Lyrica money is: We are moving those funds into the long-term pool in a staggered basis,” Bienen said. “And very little of it will be in public equities.”
Lyrica illustrates how varied the funds that make up the endowment are.
While Bienen said that during the past five years, he has used unrestricted funds and donations to bolster undergraduate financial aid and graduate fellowships, he also said that many endowment gifts come with various commitments. As an example, he pointed to the naming gift for the Feinberg School of Medicine.
“I can’t get my grubby little hands on that,” Bienen said. “It was a great thing for the university, you want to strengthen all the units, but it doesn’t help me with financial aid or anything.”
The effect that the endowment’s growth has had on Bienen, who started his term as president when the endowment was worth $1.3 billion, is substantial. He has a full schedule, including an itinerary that in the next two weeks will see him travelling to New York, Washington D.C. and Qatar on behalf of the university.
“That’s been possible because the market has been so good,” Bienen said. “I’m not going to be here forever. There are a lot of things I want to get done.”
Reach Michael Gsovski at [email protected].
