University sees double-digit endowment growth

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The University’s financial foundation grew by almost 15 percent last fiscal year, the first time in three fiscal years the fund has seen double-digit growth.

GW’s endowment now totals about $1.57 billion, an increase that mirrors a trend among GW’s competitor schools as healthy markets have boosted institutions’ nest eggs nationwide. The growth also comes after the University’s treasurer had cautioned last fall that it would be unlikely to see double-digit growth again in the near future.

The endowment grew by about $200 million through investments and donations, and saw some of its largest gains in state and federal bonds and international stocks. About $30 million came from new gifts, which marks the “largest single year of additions,” University spokeswoman Maralee Csellar said.

Over the past five fiscal years, GW has added nearly half a billion dollars to its financial base, which helps it pay for scholarships, faculty salaries and construction.

While GW’s endowment is large for a school that got a late start to fundraising, many schools with which it tries to compete have multi-billion dollar endowments, which allows those institutions to draw more from the pool each year. It also typically is one of the reasons those schools can offer larger scholarship packages.

Last fiscal year, GW’s returns kept pace with schools like Duke, Miami, Boston and New York universities, which also reported double-digit growth. Duke University, with a $7 billion endowment, led the bunch with a 20 percent increase.

“Our returns and those of peer schools are not surprising,” Csellar said.

Executive Vice President and Treasurer Lou Katz declined to say whether the gains are part of the University’s overall investment strategy or comment on whether the endowment would increase again next year. He has declined repeated requests for an interview.

Lee Gardner, a senior editor at the Chronicle of Higher Education, said a growing endowment can help strengthen a school’s financial base – and its name.

“It contributes to your reputation, your rankings, not to mention the fact that you have money to draw on,” Gardner said. “Schools that are doing well are doing pretty well. It’s not unusual but it’s certainly something to be happy about.”

Earlier this fall, GW landed in 84th place on the New York Times’ list of 99 schools ranked by endowment per student, which is largely considered a sign of economic diversity. A smaller endowment tends to constrain how much a school can give out in scholarships each year.

As the economy improves after the recession, university endowments will likely grow as well, said Ken Redd, the director of research and policy analysis at the National Association of College and University Business Officers. Endowments that top $1 billion have performed better nationwide, Redd said.

“Larger endowments tend to have access to a greater number of money managers and greater access to alternative investments, which over time have done better than smaller endowments,” Redd said.

A stronger economy also encourages people to make “riskier investments” in areas like stocks instead of more stable markets like bonds, he said.

The endowment grew by about 5 percent in fiscal year 2013, a smaller amount compared to the schools GW considers its peers. Returns dropped by 2.25 percent the previous fiscal year.

The University announced last spring that it would outsource the management of its endowment, cutting seven positions and using an outside firm to run the operations of the multi-billion dollar portfolio. Officials received proposals from interested firms over the summer, but have not yet made a selection.

Csellar said administrators do not expect the outsourcing to impact endowment growth and will pick a firm by November.

While a strong endowment bodes well for overall financial health, institutions still rely on fundraising to strengthen their bottom line on top of their endowment and tuition revenue, said Michael Nilsen, the vice president for public affairs at the Association of Fundraising Professionals.

Schools with already high sticker prices can only keep raising tuition so much, and an endowment limits the amount of money a school can use to cover annual expenses. That makes fundraising necessary in the wake of an uncertain financial market.

“Raising money for the endowment used to be a rare thing, but is pretty common these days,” Nilsen said. “Though you’re still seeing a premium placed on fundraising during capital campaigns and for projects.”

Growing donor-funded scholarships and endowed professorships are major goals in the University’s $1 billion fundraising campaign, which publicly launched this summer. So far, GW has raised a total of $605 million.

The endowment returns are listed in GW’s audited financial statements. At Friday’s Board of Trustees meeting, trustee Ellen Zane said the University earned a good overall grade from its auditor, PricewaterhouseCoopers, which she said gave GW a “very clean” report.

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