University Reports Increase In Endowment
Published: Monday, November 4, 2013
Updated: Monday, November 4, 2013 00:11
For the fiscal year ending May 31, 2013, Boston College reported a $273 million gain on investments, and a respective $238 million increase to the University’s endowment, now valued at $1.89 billion. Early figures suggest BC financially outperformed many of the nation’s premier universities during the 2013 fiscal year, respective to size of endowment. The University’s financial statement, released at the end of September, shows generally improved financial health throughout, with the endowment fully recovered from an unfavorable performance of University investments during the 2012 fiscal year—BC reported a $97 million loss on investment that year.
These respective gains and losses follow trends for universities across the country—2012 was a historically troubling year for endowments. As markets recover from the 2008 recession, universities have seen heightened fluctuation in the size of their endowments, yet BC’s 2013 financial statement indicates University investments significantly outperformed national trends.
University Spokesman Jack Dunn credits these gains to “a strong performance by our investment managers, particularly in the area of U.S. equities.”
The Boston Business Journal calculated a 16 percent increase in BC’s net endowment assets and related holdings for the 2013 fiscal year—the publication cites the University’s one-year gain as one of the highest in the country, leading the University of Pennsylvania (14.4 percent), Yale University (12.5 percent), Harvard University (11.3 percent), and the Massachusetts Institute of Technology (11.1 percent).
Notably, all these schools have substantially larger endowments than BC. In 2012, the University’s endowment was valued 41st nationally. Harvard University’s $32.7 billion endowment is the country’s largest. BC’s endowment has seen rapid growth over the last 20 years, growing to nearly five times its 1993 value. Still, it is only one-seventeenth the size of Harvard’s endowment. Comparing the respective growth of these endowments as a percent serves as a useful reference, but remains largely an arbitrary comparison, as $32.7 billion can be invested far more conservatively while still seeing sizable gains.The drastic growth of BC’s endowment over the last 20 years has allowed for more substantial investment in construction and facilities, its most visible benefits to the undergraduate population thus far being the opening of Stokes Hall last semester and the forthcoming construction of a new dorm building on the current site of More Hall.
Seemingly unrelated to what The Boston Business Journal reported as a 16 percent gain on BC’s endowment, the University’s student population shrank slightly in 2013. Dunn attributes this to a decrease in first-year law and part-time MBA students. Undergraduate enrollment was held roughly the same.
The University has shown no sign that it plans to grow or shrink its undergraduate population in response to the growing endowment. Its target of 9,000 undergraduates has been either met or only slightly exceeded for well over 10 years, with 9,100 enrolled in 2013.
“Undergraduate enrollment has remained steady for more than a decade at 9,000 undergraduates,” Dunn said.
“To be honest, I don’t see significant correlation between an institution’s endowment and admissions,” said John Mahoney, director of Undergraduate Admissions.
Mahoney handles some infrequent questions on the endowment within his role in admissions.
“Occasionally, a parent will ask about our endowment as a means of measuring the University’s overall fiscal strength,” Mahoney said. “These are financially savvy parents who want to evaluate a college’s resources and long-term viability, but in the final analysis, academic reputation, quality of experience, and fit between the student and the college are the most important factors driving the enrollment decision.”
BC’s gain on investments comes in a year of slightly diminished contribution revenue, falling to $74 million from $92 million in 2012.
The University collected $671 million in operating revenue during the 2013 fiscal year which, offset by its roughly equivalent operating expenses, leaves $117,000 in profit from operations.
Tuition, fees, and auxiliary enterprises (housing, dining, bookstore, concessions, printing) accounted for $521 million of operating revenue—this figure takes into account the $153 million given in financial aid. The University also collected $50 million in research revenue.
The remainder of operating expense was covered by an $84 million payout from the endowment, granted with the review of the Board of Trustees. The objective of its endowment portfolio, as defined by the University, is to “attain an average annual total return that exceeds the University’s spending rate plus inflation within acceptable levels of risk over a full market cycle.”