TBJ on Duke: A billion here, a billion there, then you're talking about real money

The Triangle Business Journal reported on Friday -- apparently unconfirmed by sources at the university -- that Duke's endowment has given back $1.1 billion in gains to stumble back to the $5 billion mark.

School officials are tight-lipped about the status of the endowment, but a source familiar with the university’s investment returns says the endowment portfolio is down by about 19 percent from the fiscal year ended June 30, when it stood at $6.1 billion.

Those losses are in line with what other universities have reported to the National Association of College and University Business Officers. Ken Redd, NACUBO’s director of research and policy analysis, says endowments generally have lost 20 percent to 25 percent of their value this year.

According to the TBJ, investment returns on the endowment provided $300 million towards the operating budget of the university, or about 15% of operating revenues, on the low side of the average listed by the Journal for private universities. (Tuition stands at 14% of operational revenues.)

The business newspaper reports that, unlike some Ivy League schools, has not imposed broad hiring or wage freezes, with VP for public affairs Mike Schoenfeld saying the institution is "being very prudent and careful with [its] expenses."

[Triangle Business Journal]

Comments

[eric]

i'm confused. if endowment returns and tuition together account for only 30% of operating costs, where does the rest of it come from?

[Matt]

eric,

A large research university like Duke gets a lot of money from research grants to its faculty, known as "overhead." Let's say that Professor Johnson gets a $1 million grant from the NIH to study some cancer gene. The NIH doesn't just pay Professor Johnson, they also pay Duke between 10% and 50% of the grant, so Duke gets between $100K and $500K. This money is used for the day-to-day operations of Duke.

I've also heard that a very large percentage of donations to Duke come from only a handful of donors, like Melinda Gates. If those very rich people are unable/unwilling to donate to the university, the endowment runs out quickly.

What I am concerned about with the economic downturn is the university's commitment to financial aid. Ivy league schools offer hundreds of low-income students free tuition every year, but Duke students rely heavily on loans. They had started to change that over the last couple of years, but I fear that if the endowment loses too much, Duke will step backwards.

[crc32]

Matt-

Your comment about a handful of donor providing a large percentage of donations to Duke is accurate but misleading. Melinda Gates has provided Duke (both through the Gates Foundation and as the French Family) several hundred million dollars. That makes her "providing a very large percentage of donations to Duke", but most of those donations have supported a single research entity (the HVI) and capital projects - not operations.