Endowment returns drop for UC Berkeley, universities across the nation

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Following two years of strong growth, short-term endowment returns for universities across the nation have taken a sharp decline, according to a report by the National Association of College and University Business Officers and the Commonfund Institute published Feb. 1.

UC Berkeley’s endowment returns ­— a source of the private funds on which the university increasingly relies ­­—  decreased by about 1 percent in line with the national trend for the 2012 fiscal year.

Using data from 831 U.S. universities, NACUBO and the Commonfund Institute’s report shows that short-term endowment returns have fallen to an average of -0.3 percent in the 2012 fiscal year. Last year, average returns were about 19.2 percent.

On a longer time frame, however, 10-year endowment returns have remained healthy; on average, 10-year returns for endowments were 6.2 percent, compared to 5.6 percent last year.

According to the report, institutions with the largest endowments assets produced the highest returns. Institutions with over $1 billion in endowments, primarily including private universities such as Yale University, produced an average of 0.8 percent in returns.

Those with “mid-sized” endowments, including the University of California and many other public higher education institutions, reported negative returns.

According to the treasurer of the regent’s annual endowment report, the university’s endowment returns fell to -0.36 percent, and UC Berkeley’s returns fell to about -1.0 percent. The returns remained above their -2.48 percent benchmark, according to the report.

The UC system’s endowment assets are split between the regents and foundation assets from each of the campuses. Returns for the regents’ endowment assets, valued at about $6 billion, fell to -5.5 percent, while returns for total foundation endowment assets, valued at about $4 billion, declined to -0.7 percent.

Drops in endowment returns, however, are not expected to deter donor support for the university, said Lee Goldstein, a board member of the Berkeley Optometry Alumni Association.

“At this point, (the returns) do not seem to have much of an impact on what you plan to donate,” he said.
The university has seen increased financial support from donors, as state funding has become an increasingly unreliable source of funds over the past several years, according to Goldstein. Many alumni groups have increased their organizational efforts to maximize their fundraising abilities.

Both the UC system and UC Berkeley depend heavily on private funding. According to the UC’s 2012-13 budget report, 7 percent of the university’s revenue comes directly from private support, while about 11 percent comes from the state.

“The University of California is a treasure. Those of us who have been lucky enough to attend the university have benefited immensely from its impacts,” Goldstein said. “Hopefully we can be beneficial to the state as well.”

UC spokesperson Dianne Klein said the change in short-term endowment returns does not have significant implications for the university since they reflect a short period of time.

“All of these reports only calculate a snapshot of where we are now,” she said. “You can’t interpret this to say we are really down or up, since it really evens out.”

Additionally, Klein said the endowment returns will not have serious implications concerning the university’s accessibility or future funding.

“It isn’t as though if the endowment is down, the cost of education is down,” she said.

Alex Berryhill covers higher education. Contact her at [email protected].