NU lost more than 14 percent of its nearly $7 billion endowment during the recent economic downturn, University President Henry Bienen said Thursday.
In light of the tumultuous state of the stock market, NU’s endowment has “taken a big hit,” said Bienen, who will retire at the end of this year. Bienen said the investments which make up the endowment were “flat” beginning in August, then declined dramatically in September. In the beginning of October, Bienen said the investment situation was “the worst since the Great Depression.”
“There’s nowhere to hide in this kind of market, as some of us know personally,” Bienen said. “We’ve been meeting almost nonstop, thinking about what the implications are for the university.”
Bienen has been meeting with school deans, budget managers and other officials in the past two weeks to discuss future plans for the university’s spending, investments and financial aid policies, he said.
Currently, the university’s annual budget is about $1.5 billion, said Eugene Sunshine, senior vice president of business and finance. That figure includes salaries and health care costs for faculty and staff and utility costs and financial aid, among other costs, he added.
In light of the endowment loss, the university needs to reassess some of the expenditures that are currently in consideration, Sunshine said.
“It has a lot of ramifications,” Sunshine said. “The university is examining what the best thing is to do, and what it means is that you have to be very prudent with what we should plan on as a university in terms of spending our money.”
The university’s spending guideline is set by the Board of Trustees, who have already developed spending plans for the next fiscal year, Bienen said.
“Northwestern is relatively very well off,” Bienen said, adding that the school’s funds have been “managed conservatively.”
The instability of state budgets is leaving public universities more affected by current economic woes than private universities like NU, allowing NU to “poach from lots of places” and consider hiring top faculty from state schools, Bienen said.
In the future, new hires will be a “tougher sell” as the university reviews its plans for future spending, Bienen said. While the university does not anticipate making cuts to the current staff, it will be “very careful with new hires onto staff or faculty,” he added.
The school is also considering deferrals of several building projects that are already underway, excluding the construction of the Bienen School of Music and Silverman Hall and renovations to Harris Hall, Bienen said.
While the relative state of the market is subject to constant change, the university is “not going to give up on financial aid,” Bienen said.
Currently, 75 to 80 percent of NU’s financial aid funds come from the university’s central budget, Bienen said.
Other private institutions such as Yale and Harvard use endowment funds for their financial aid programs, putting those funds more at risk in a volatile market.
Because of the unexpectedness, this is a time for the university to be “self-examining and analytical,” Sunshine said.
“It’s not a permanent loss,” he said. “We don’t know when and we don’t know how fast, but obviously the value of the endowment will go up again.”
