Recent Trends in Endowment

Abstract

A BOUT a year ago Dr. Ernest V. Hollis of the United States Office of Education asked me if I would make another study of the investment statistics of higher education similar to the ones prepared for the American Council on Education from I94I to I944. This was on the theory that not everything has been said on the subject of college investments. Dr. Hollis said that we should go ahead and prepare a questionnaire. What came out was quite different from what we started to do. In the studies made for the American Council on Education about I30 institutions participated. In the current study there are 200. Of course that doubled all of the statistical work, but it did not significantly change the results. I will give you a few of the figures. In the Office of Education Biennial Statistics for i955-56 there are I858 institutions of higher education. Of these, over half, I094, reported endowment funds. These included gog private and I85 public institutions. Seven hundred sixty-four institutions reported no funds at all, no endowments. We obtained figures on both book and market values. The total funds ran to $3.7 billion, book value, in I956, and the book value of those funds had doubled from I940 to I956, so you see endowment funds are growing substantially. In this I958 study 22 per cent of the funds at market value are concentrated in five institutions; 50 per cent are concentrated in 54 institutions and 92 per cent in IOI institutions. Thus on a national basis, 5.2 per cent of all institutions have 92 per cent of the total endowment. Then again for I920, I found that 76 per cent of private gifts were for endowment; in I956, the proportion was down to 33.6 per cent. And again, in I930 earnings on endowment represented I4.2 per cent of total education and general income, but they had fallen to 5 per cent in I956. My estimate is that at the end of June, I958, the market value of all funds at the 200 institutions with the largest endowments was $5.5 billion. The earnings of the 200 institutions -were 4.9I per cent of book and 3.84 per cent of market value. Eighty per cent of the institutions were in the range of 3.2 to 4.2, based on market values. The highest rate came from preferred stocks, which was 4.87 per cent. The lowest was 2.86 from government bonds. Over the period I94I-1958 the market value of the common stocks purchased by the 200 institutions included in the study had risen 89 per cent over the original or bookvalue cost.' For all other types of investment, with the exception of a small number of investment-company securities, the market value declined below original cost. It should be pointed out, however, that a different comparative situation would exist between institutions which sold large blocks of stocks, and took profits, with a resulting change in values, and those which retained their original investments. Everything else showed a depreciation -the bonds, 2.2, and the preferred stocks,