Thoughts On College Endowments

Several months ago, I wrote an editorial in the Deseret News in support of the tax deduction for charitable giving.  I have been thinking about the part encouraging distribution of charitable funds since the National Association of College and University Business Officers (NACUBO) released it's annual study of endowments.  I found several points of interest in the study:

• The study covers 839 organizations with an average endowment size of just under $500 Million.  That translates to total endowments at these schools of $417.4 Billion!
• The five largest university endowments (or the top  0.6%) of schools hold 24.4% of the total assets.  The five largest endowments are:
• Harvard $31.7 Billion
• Yale $19.4 Billion
• University of Texas System $17.1 Billion
• Princeton $17.1 Billion
• Stanford $16.5 Billion
• The 10 largest endowments hold just over a third of the total assets of all 839 schools
• 75 organizations have an endowment over $1 Billion
• The average return of all endowments in the study during the most recent academic year was 19.2% (crude math suggests this is approximately $67 Billion before additions, withdrawals, etc)
• The average spending rate during the same period was 5.2%
• The average endowment that has over $1 Billion in assets holds a full 60% of those assets in alternative investments.  That means over $100 Billion of these endowments has been invested in hedge funds, private equity funds, real estate partnerships, etc

 While I'm shocked at the resources that are being amassed at the most sophisticated organizations (largely because of the tax breaks that enable them), I do not believe that curbing the tax deduction for charitable giving is the answer.  I believe other things can, and should, be done to encourage larger distributions from endowments.