UI The Daily Iowan, IA
03-01-07
UI endowment return rate under average
Taryn Deutsch - The Daily Iowan
Endowment funds are one of the three primary contributors of income to highereducation institutions, and Iowa universities are producing perhaps less than
desirable outcomes, according to a recent Bloomberg survey.
While the UI's endowment is the largest of the three regent universities, its return
rate for fiscal 2006 fell short of national averages and came in last among the UI,
Iowa State University, and the University of Northern Iowa.
The UI's total endowment size, as of June 30, 2006, was $832,869,000, based
on the National Association of College and University Business Officers' 2006
market value study of endowment assets. The university's total endowment
increased 5.9 percent from 2005.
Meanwhile, Iowa State's endowment, which rose 8.6 percent from 2005,
totaled $496,018,000 for the same period. UNI's endowment amounted to
$57,543,000 for fiscal 2006 - an 11.4 percent increase from 2005.
Each state university has a separate nonprofit foundation that gathers money,
which is then contributed to the university.
Beth Ingram, a Tippie College of Business associate dean, said making these
kinds of comparisons can be tricky. For instance, a university could hold risky
stocks, which can lead to a good or bad endowment outcome in a given year.
"Returns have high variance," she said. "One year is not a long enough period to
compare rates. Other universities are going to have different assets and different
goals from those of the UI."
The three universities also differ greatly in their endowment return rates.
The UI ranks the lowest, with a return rate of only 7.4 percent for last fiscal year.
This is below the Standard & Poor's 500 index benchmark of 8.6 percent and
below the national average of 12.8 percent for schools in the country with similar
endowment sizes, according to the association's study.
"While the short-term performance ending June 30, 2006, was below our peers,
over the past year we have already made several changes to improve overall
performance," said Tiffani Shaw, the UI Foundation's senior vice president, chief
financial officer, and treasurer, in an e-mail. "We replaced some managers and
added international exposure."
Iowa State had a return rate of 8.5 percent, falling below the national average of
11.9 percent for schools in its category, according to its foundation. At 14.8
percent, UNI ranked above the national rate of 10 percent among similar schools,
said Ruth Ratliff, the director for center development for the UNI Foundation.
"Percentages don't make for an interesting comparison," Ingram said. "When you
measure percentages, the base still matters, and we must decide whether we
care about the percentage increase or the actual amount of money earned."
The UI Foundation website shows that the university ranks last in endowment
size of the Big Ten universities but fourth on a per-student basis.
Even so, a recent Bloomberg survey of the top 25 biggest U.S. higher-education
funds, shows that the UI is far behind such leaders as Harvard, Yale, and the
Massachusetts Institute of Technology.
Those schools employ professional in-house chief investment officers, while Iowa
universities work with volunteer investment managers.
Shaw said the foundation has discussed hiring internal investment staff
members, but the current size of the UI's endowment isn't large enough to
support those employees.
"An entire investment staff would increase costs dramatically," she said. "And in
all cases, a volunteer committee would still be used to approve those decisions."
E-mail DI reporter Taryn Deutsch at:
taryn-deutsch@uiowa.edu