Richest US universities reel in donors
Stanford tops list as the elite wins bigger share of record $40bn pot
The US’s richest universities are winning an increasingly large share of donors’ money and enjoying better investment returns on their endowments than are other institutions, according to new surveys.
A record $40.3bn was raised by US colleges and universities in 2015, according to the Council for Aid to Education, but 18 per cent of that went to just 10 institutions — and Stanford University alone raised $1.63bn.
The CAE study was released on Wednesday, the same day the National Association of College and University Business Officers (Nacubo) said that the largest endowments returned an average 4.3 per cent in the most recent financial year, compared with a 2.3 per cent average for the sector.
Evidence of the increasing concentration of wealth among elite institutions will stoke a debate about the best places for wealthy individuals to direct their philanthropy at a time of concern about inequality.
While opponents argue that giving to elite schools perpetuates inequality, many donors say their money supports scholarships and other programmes to widen access.
“When donors give money to support academic activity, endow chairs and build buildings that house laboratories or classrooms, that means we do not have to cover the cost of those things through tuition,” said John Walda, chief executive of Nacubo.
The 18 per cent share taken by the top 10 is the highest on record, up from 15 per cent in 2000.
After Stanford, Harvard was the next most effective fundraiser in 2015, with a $1.05bn haul. The pair have held the top two spots in the CAE survey for 14 of the past 16 years.
The top 10 most successful fundraisers have remained largely constant since 2000. The next most successful institutions in 2015 were the University of Southern California ($653m) and the University of California-San Francisco ($609m) — reflecting the riches made in the tech sector by alumni — followed by Cornell ($590m).
Ann Kaplan, survey director at CAE, said: “These institutions receive a lot of support in part because they spend a lot — they are more than just colleges; they have art museums, hospitals, symphonies — and in part because they are good stewards of assets.
“If a college has a strong endowment management team, donors are more comfortable giving them large gifts. If the college cannot do as well or better than the donor with the assets, the donor is less likely to transfer large gifts to a university.”
Giving by wealthy individuals, either directly or through family foundations, accounts for over 50 per cent of donations to US universities, and accounted for most of the 7.6 per cent increase in the total raised last year. Gifts to fund current operations increased 13.1 per cent, while those for capital purposes — including contributions to the endowment and to fund buildings and equipment — were flat. Those larger capital gifts are correlated to the US stock market, CAE says, which was down last year.
Weak equity markets led to a drop in average endowment returns in the year to June 2015, according to the Nacubo survey, to 2.4 per cent from 15.5 per cent the year before. That took the 10-year average annual return down to 6.3 per cent, further below the 7.5 per cent target used by most universities.
Institutions with endowments above $1bn, however, enjoyed outsize returns last year, and their 10-year average remains 8.2 per cent. Larger endowments allocate more to private equity and venture capital, which performed well in 2015, and they are also able to negotiate lower fees.
Harvard has the largest endowment in the US, with $36.4bn in assets, followed by Yale with $25.6bn. Stanford’s is the fifth-largest, with $22.2bn.
At the time, Mr Paulson responded to the criticism in an interview with the Financial Times.
“I don’t come from an elite background,” he said. “I went to public schools in New York City. I went to Harvard on a scholarship and I am very grateful for the financial support that I got. The money is going to be used largely for financial aid and scholarships; I know how expensive it is to go to university. It will also go to research that is going to be beneficial and impactful to all humanity.”
Copyright The Financial Times Limited 2016. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
