Endowment falls 18 percent

By Josh Rutenberg     9/24/09 7:00pm

While Rice may not have lost as much as of its investments as other universities, its endowment still took a hit during the most recent recession. For fiscal year 2009, Rice incurred an 18.2-percent loss on the endowment's investment returns, worth about $838 million. The university also spent $215 million of the endowment, $55 million of which was recouped in endowment gifts, according to unaudited reports issued from the Office of the Vice President for Investments Treasurer.

The report's final numbers show that the endowment, which was valued at $4.61 billion at the end of June 2008, had dropped to $3.61 billion as of this June. As a result of the endowment losses, the university has mandated a 5 percent budget cut for each department. Exactly what will be cut has yet to be determined.

The endowment, which originally consisted of $4.6 million that founder William Marsh Rice left to the university in his will in 1904, grows on interest and gifts each year. A portion of the endowment is budgeted between department funds, scholarships, maintenance and athletics, and the remainder that grows is invested in various assets, such as private equity funds, real estate, timber and energy investments and United States Bonds.

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Despite a 17- to 18-percent drop in global stocks and bonds last year, the endowment performed better than those at many of Rice's peer institutions. Rice, along with most national universities, reports its annual endowment each February to the National Association of College and University Business Officers.

Associate Vice President for Investments Claire Nelson said for fiscal year 2009 Harvard University reported a 27.3-percent loss in its $36.6-billion endowment, and Yale University reported a 24.6-percent loss from its endowment of $22.9 billion. The national average for a university endowment loss fell at around 17.2 percent.

"We had a good, solid performance in a tough year," Nelson said. "We haven't changed our approach policy-wise. We started looking at the portfolio, monitoring it more closely and we made higher cash-balances."

Of all of Rice's assets, only bonds positively increased in value over the last fiscal year.

"Our public equities and hedge funds performed well, relatively speaking," Nelson said.

The $55 million Rice received in endowment gifts came from alumni, corporations and other donors. This is up from 2008, when Rice received $42 million in endowment gifts.

Historically, the endowment supports 40 percent of the university's budget, but Nelson said this year the endowment will come closer to supporting 45 percent of the budget.

From 1912 until 1965, the endowment allowed students admitted to Rice to attend without paying tuition.

Nelson said the Office of Investment is confident Rice will be in good standing when the next NACUBO report on annual endowments is released.

"We feel our return will be favorable when compared to other institutions," Nelson said.

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