URI, Brown endowments feel market volatility

ANNUAL REPORT: URI Foundation members go over the new 2016 annual report in the Alumni Center. From left, Rita A. Verespy, director of gift planning; Lil Breul O'Rourke, president; Deborah Imondi, Investment Committee chair; and Adam Quinlan, chief financial officer. / PBN PHOTO/ MICHAEL SALERNO
ANNUAL REPORT: URI Foundation members go over the new 2016 annual report in the Alumni Center. From left, Rita A. Verespy, director of gift planning; Lil Breul O'Rourke, president; Deborah Imondi, Investment Committee chair; and Adam Quinlan, chief financial officer. / PBN PHOTO/ MICHAEL SALERNO

Colleges and universities rely on endowments to fund programs such as scholarships and professorships, but many investments felt an uncomfortable squeeze during the Great Recession – and Rhode Island was not exempt.

Endowments, according to the American Council on Education, are “an aggregation of assets invested by a college or university to support its educational mission in perpetuity.”

Brown University, an Ivy League school in Providence, and the University of Rhode Island, the state’s principal public research school in South Kingstown, are both supported by endowments.

At the end of Brown’s fiscal year, June 30, 2016, the school’s endowment stood at $3.2 billion, representing a 3 percent decline since July 1, 2015. In that year, the endowment paid out $166 million to the university, which funded libraries, instructional programs, professorships, scholarships, fellowships and prizes, among other costs, and is equivalent to 18 percent of the operating budget or $18,500 per student.

- Advertisement -

In comparison, URI’s endowment stood at $108 million as of June 30, 2016, and paid out $3.7 million to the university this year in support of educational goals and covered fluctuating state appropriations. The previous fiscal year’s endowment was $118 million, with a $3.3 million payout to the school.

Both schools have had to manage fluctuations in the value of their endowments since the Great Recession.

According to Brown’s Investment Office, an in-house management team created in 2000, in the decade from 2006-2016 the endowment seesawed from $2.2 billion in 2006 to a low of $2 billion in 2009 and has increased by more than half for a high of $3.3 billion in June 2015.

In a statement, Brown spokesman Brian E. Clark said the endowment’s recent performance “is a critical factor in achieving our strategic priorities.”

Brown’s management strategy increased investment in asset classes with higher risk-adjusted returns, varied their sources of return and worked with institutional partners to strengthen the giving relationship.

In a statement, Joseph L. Dowling, the university’s chief investment officer, said: “The Brown endowment team has … tactically refined our asset allocation approach to intelligently manufacture new engines of growth.”

In October, Brown announced the endowment’s 2016 performance beat the preliminary return of its benchmark portfolio (-2.2 percent), hitting -1.1 percent as well as Boston-based investment management firm Cambridge Associates’ preliminary mean and median returns for colleges and universities (-2.9 percent).

In comparison, according to the University of Rhode Island Foundation, URI’s endowment rested at $77.7 million in 2006, dipping as low as $59.6 million in 2009, and reached $119 million in 2014. According to URI’s June 2016 Endowment Report, the endowment returned -0.3 percent as of June 30, 2015, the latest data available.

To best manage the endowment during the decade from 2006-2016, the university has increased the team managing its investment. Deborah Imondi, who took over as investment committee chair in September, said the university doubled the number of fund managers and employed Cambridge Associates to help strengthen the investment and increase returns.

Over the past six years, Imondi said the URI Foundation has sought to diversify its assets, moving toward global bonds, Treasury Inflation-Protected Securities, known as TIPS, private-equity portfolios and added more asset classes, such as sovereign bonds, to diversify the investment’s risk.

“I’m much more interested in risk-adjusted returns,” she said of the university’s new strategy, relying on a range of returns and analyzing more possible outcomes for the investment.

In 2006, contributions from the endowment provided 33 percent of Brown’s total financial aid budget. That number increased to 43 percent in 2008, when the average grant to students receiving financial aid was $23,787, or 49 percent of the total cost of attendance. The endowment draw in 2008 was 5.39 percent, the higher end of the 4.5-5.5 percent draw, said Clark. During the 2015-16 academic year, contributions from the endowment provided 34 percent of the total financial aid budget. The average grant award of $41,438 per student on financial aid covered 63 percent of the total cost of attendance.

Just over half of URI’s endowment payout funds scholarships and 75 percent of students benefit from a form of financial aid. Student aid grew from $33.5 million in 2006 to $48.1 million in 2008 and $100.3 million in 2016, according to URI.

After the U.S. presidential election, Imondi said, “volatility will continue” and characterized the coming years as “an environment where we need to assess whether our asset allocation is still appropriate.” •

No posts to display