Rice University’s endowment is valued at $5.3 billion, the 20th largest in the nation. While it supports 40 percent of Rice’s budget, some students have voiced concerns that academic funding does not reflect endowment size. In an interview with the Thresher, the Rice Management Company clarified how the endowment is allocated and spent.

Chief Investment Officer Allison Thacker (Baker ’96) oversees the Rice Management Company.

The RMC stewards Rice’s endowment, made up of money and assets donated to the university.

The RMC invests these funds within different economic sectors to accumulate over time. A portion is withdrawn annually for use.

“The endowment is a charitable donation invested in perpetuity to provide consistent, dependably increasing support,” Thacker said.


The endowment provided 40 percent of the University’s operating revenues in the 2015 fiscal year. Thacker said the national mean across all other universities is 19 percent and the median is 14 percent.

“The endowment is critical to making Rice work,” Thacker said. “We’re a relatively small school; we have a relatively high percentage of financial aid, as well as merit aid. Those are all things the endowment covers — we are very lucky to have it.”

Thacker said the Rice Management Company’s current goal is to earn 7.5 percent investment return to keep up with inflation and spending such that the size of the endowment does not decrease. She said the 7.5 percent return is not necessarily an annual requirement, but an average over time.

“My team gets up out of bed everyday, and the goal is: How do we earn back 7.5 percent?” she said. “That’s what Rice needs us to earn.”

According to Thacker, Rice spends about 5.5 percent of the endowment every year, with 2 percent currently lost to inflation.

Thacker said these goals are set in order for Rice to make the revenue source as dependable as possible.

“Stock markets can have volatility,” Thacker said. “[We try] to make the endowment distribution more predictable because it’s very hard for students and faculty to deal with variability in their budgets.”

The portion of revenue that is set aside for operational costs is divided into a core budget and a consolidated budget, both overseen by Vice President of Finance Kathy Collins.

The consolidated budget includes all operating sources such as research grants from the federal government, parking and transportation, and housing and dining revenues. The core budget covers areas such as the budgets of the Schools, athletics, and the Fondren Library. It is funded from tuition, restricted endowments and unrestricted endowments.

Donors who provide restricted endowments designate the funds for a specific purpose, such as the $50 million donation from John and Ann Doerr for the creation of the Doerr Institute for New Leaders, whereas unrestricted endowments have no specified purpose. The Rice Management Company allocates the latter based upon various needs in the university’s budget.

According to Collins, Rice’s endowment supports about 60 percent of the core budget, a dependency which can be a double edged sword.

“When markets are going up, that’s a great thing. When time’s are more challenging it’s more of a constraint than a good thing,” Collins said.

For the 2015 fiscal year, Rice’s return was 4.2 percent. Yale University’s return was 3.4 percent, Stanford University 7 percent and Dartmouth College 8.3 percent.

“I view all of the [peer institutions’] endowments not necessarily as competitors but collaborators — unlike in the for-profit world, there’s a lot of collaboration,” Thacker said. “We could all do really well, and that would be great for the whole industry and our students.”

Based on a long-term portfolio policy, Rice allocates assets into seven different areas: publicly traded equities, venture capital and private equity, hedge funds, natural resources, opportunistic, real estate and fixed income.

According to Thacker, the RMC, along with Rice’s Board of Trustees, decides upon its investments annually; however, changes from year to year are consistently modest. Thacker said Rice’s strategy has changed over decades.

“In the ’60s [Rice] did quite a bit of investing into energy and real estate; in the ’70s and ’80s we invested a lot in U.S. stocks,” Thacker said. “In the ’90s we moved into international investing as well as a little bit of venture capital and in the 2000s we moved into private equity and hedge funds.”

Thacker said the 2010s have had a shift in priorities opposed to in past decades.

“In this decade, I would say our focus has been much more [on] finding the most talented managers in these areas as opposed to making major changes,” Thacker said.

According to Thacker, though minute changes may occur, Rice’s asset allocation is quite similar to what it was 10 years ago.

“Endowments change and evolve very slowly because we’re in the forever business,” she said.

Rice’s allocation figures are fairly standard compared to those of peer institutions with the exception of its investment in natural resources. Rice aims to invests 12 percent into natural resource managers, whereas Yale aims to invest only 6.8 percent, and Stanford and Dartmouth both average 10 percent of their endowments.

According to Thacker, “natural resources” is broad because it encompasses agriculture, timber, oil and gas and metals and mining. Thacker said that combined with real estate, the investments are referred to as real assets.

“Investing in real assets has the benefit of providing inflation protection,” Thacker said.

According to Thacker, Rice has a long history of investing in natural resources, seeing that it’s an area that consistently brings a strong source of returns for the university. She said 2 percent of the natural resources investment is in a 50,000-acre timber forest located in Louisiana.

She said Rice’s inclination to invest in natural resources is analogous to a school in New York choosing to invest more in the financial sector.

“Given our location and our alumni network, we have excellent access to information about natural resource investments,” Thacker said. “This is an area we can strive for excellence in.”

Thacker simplified the philosophy for Rice’s endowment investment into two missions.

“The first thing is, ‘Do no harm’ and then, ‘Do a good job,’” Thacker said.