Endowments increase across nation

Princeton’s endowment grew by 14.1 percent between July 2009 and June 2010, a sharp improvement over the previous fiscal year’s 22.8 percent drop.

University Provost Christopher Eisgruber ’83 explained in an October press release that, “Princeton has established a new baseline for its budget and avoided the need for additional reductions in spending” due to the endowment’s growth.

Other Ivy League universities also reported increases in their endowments in 2009-10. Harvard, which has the nation’s largest total endowment with $28 billion, reported a 5.4 percent increase while Yale reported a 2.0 percent growth. Both Cornell and the University of Pennsylvania registered a 13 percent increase while Columbia had the Ivy League’s highest increase, reporting a 17 percent return, according to the calculations on these three universities’ websites.

Nationally, Syracuse University recorded the largest increase in endowment at 29 percent.

Schools with endowments of over $1 billion continued to have a higher annual return, averaging a 12.2 percent increase this year.

Princeton’s endowment is valued at $14.7 billion, the third highest nationally behind Harvard and Yale.

NACUBO President John Walda cautioned in an article in The Chronicle of Higher Education, however, that most university endowments are still below their 2007 levels, some by over 20 percent.

Nevertheless, Eisgruber expressed his satisfaction with the endowment’s performance in comparison with those of other schools.

“Princeton’s endowment has performed exceptionally well over the past three decades. PRINCO’s [Princeton University Investment Company] careful stewardship of the endowment has supported the University’s core mission and made possible a number of important new initiatives, including the University’s no-loan financial aid policy,” Eisgruber said in an e-mail.

PRINCO is responsible for the management of Princeton’s endowment. Other universities have similar financial management organizations, such as the Harvard Management Company.

According to the University’s 2010 Report of the Treasurer, which outlines how funds are used and accumulated, annual expenditures used to comprise 4 to 5 percent of the University’s endowment. In 2006, the University’s Board of Trustees decided to slightly raise the level of annual spending to 5.75 percent of the endowment, citing the strength of the University’s investment program. In October last year, the University announced that the spending rate would increase to 6.04 percent. The current level is much higher than the national average of 4.5 percent and slightly higher than that of colleges with billion-dollar endowments, which have an average annual spending of more than 5.5 percent.

According to the Chronicle, Princeton was among only a few schools that decided to increase its spending limit in the past year. Walda explained that an increased spending limit for universities is generally unsustainable in an uncertain economy.

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Eisgruber acknowledged that the endowment must be handled carefully.

“We will have to anticipate and contend with market volatility over the short term. Doing so will require us to budget prudently, but it will not require us to depart from the investment model that has served us well in the past and continues to serve us well today,” he said.