2017 NACUBO

[78crusader]

The 2017 NACUBO endowment report is out.  VU's endowment increased over the past fiscal year by several hundred thousand dollars to around $204.7 million.  This is as of July 1, 2016.

We rank #295 out of over 800 institutions.  To give some historical perspective, in 2002 the endowment was $118 million and we ranked #266.  To go back even further, in 1968 VU had essentially NO endowment.  None. 

Our endowment is still a bit larger than, for example, Butler, Drake, and Gonzaga (perhaps putting a little bit of a dent into the argument that mens' basketball success = huge endowment increases). But we are WAY behind other private schools like Wheaton, St. Olaf, Wabash and DePauw. 

What I don't understand is how VU can have an endowment campaign that by July 1 probably had raised over $100 million and our endowment, at least according to NACUBO, grew by several hundred thousand.  Perhaps someone a lot smarter than me (plenty of those people on this board) can educate me on this.  Thanks,

Paul

[VULB#62]

And as of Milwaukee over $150 million in pledges. Maybe that is it. Pledges. If the cash aint there it doesnt count?

[FieldGoodie05]

The 2017 NACUBO endowment report is out.  VU's endowment increased over the past fiscal year by several hundred thousand dollars to around $204.7 million.  This is as of July 1, 2016.

We rank #295 out of over 800 institutions.  To give some historical perspective, in 2002 the endowment was $118 million and we ranked #266.  To go back even further, in 1968 VU had essentially NO endowment.  None. 

Our endowment is still a bit larger than, for example, Butler, Drake, and Gonzaga (perhaps putting a little bit of a dent into the argument that mens' basketball success = huge endowment increases). But we are WAY behind other private schools like Wheaton, St. Olaf, Wabash and DePauw. 

What I don't understand is how VU can have an endowment campaign that by July 1 probably had raised over $100 million and our endowment, at least according to NACUBO, grew by several hundred thousand.  Perhaps someone a lot smarter than me (plenty of those people on this board) can educate me on this.  Thanks,

Paul

I recommend a Podcast (Malcolm Gladwell "Revisionist History" Episode FOOD FIGHT and MY LITTLE HUNDRED MILLION).  These podcasts present good examples of our contemporaries and their approaches pertaining to endowment.

Episode FOOD FIGHT: Reviews two elite schools Bowdain College and Vassar College in their competition for students.  It touches upon how endowment is used at Vassar to get the best and brightest across all socioeconomic levels.

Episode MY LITTLE HUNDRED MILLION touches upon the use of Endowment and how it's a more recent phenomenon.  VU having little to no endowment in the 1990s and before was not uncommon.  Schools appeared to have used heavier tuition with less scholarship to pay the bills.  This makes some sense considering the recent approach to inflate the List Price of college to demonstrate strong savings (scholarship).  Now I know that's only a small portion, there are other great pressures on University costing models.

(recruit elite earners = kids who pay 100% tuition) This saves endowment for other needs, operating costs would come out of tuition
-VS-
(recruit through heavy scholarship the best young thinkers (impoverished or lower income parents ) and use endowment to pay the bills).  This is a big drain on endowment + requires a healthy population of students paying full boat to cover the heavy scholarship.

I'm not sure of VUs approach, but I'd recommend these two episodes as interesting at least.

Fair Warning, Malcolm Gladwell writes for The New Yorker, so some of his observations are fairly liberal.  I'm conservative but see the value in different POV.

[ValpoFan]

A lot of the endowments talked about in the recent campaign are commitments rather than instantaneous gifts. My understanding is that some (most?) of the donors commit an amount of $$$ in their will to Valpo's endowment. That money, however, is only transferred after they are gone.

[valpo95]

A lot of the endowments talked about in the recent campaign are commitments rather than instantaneous gifts. My understanding is that some (most?) of the donors commit an amount of $$$ in their will to Valpo's endowment. That money, however, is only transferred after they are gone.

ValpoFan is correct, though I would add that there are a range of donation strategies. Typically the reports only count the actual in hand endowment values. It is fairly common for major donors to spread out their donations over more than one tax year, so it is doubtful that very much of the current campaign would have been received in time for the July 1, 2016 deadline. Hopefully, with the commitments that have been announced, we should see an increase starting in 2017.

[VULB#62]

That's how i read it.

[78crusader]

Thanks for clarifying, valpo95.

However, it is hard for me to accept that the university raises $100 million plus and all of it is in the form of commitments rather than instantaneous gifts. Even a tiny fraction of instantaneous gifts -- say, $1 million, or less than 1% of the total raised -- would be more than the few hundred thousand that the VU endowment increased over the past year. 

Paul

[crusader05]

I know there have been endowments specifically for chairs or scholarships. Would those show in the general endowment or go elsewhere?

My guess is that most of the money hasn't come in yet

[crusadermoe]

I think the answer to 78Crusader is that NACUBO is a "net" number that combines the effect of gifts and investment results.

If the cash from gifts was $2.0 and the investment result on June 30, 2016 was a loss of $1.5 million, then the net is a $0.5 increase.

The uses of the endowemnts wouldn't affect the NACUBO numbers.

[agibson]

I know there have been endowments specifically for chairs or scholarships. Would those show in the general endowment or go elsewhere?

I believe those would be reflected in the general endowment.

[valpo95]

I think the answer to 78Crusader is that NACUBO is a "net" number that combines the effect of gifts and investment results.

If the cash from gifts was $2.0 and the investment result on June 30, 2016 was a loss of $1.5 million, then the net is a $0.5 increase.

The uses of the endowemnts wouldn't affect the NACUBO numbers.

That is a great example, and there is more detail in the NACUBO report.

I'd highlight that Valpo saw a .2% increase in the overall endowment (up to 204.7M) from 7/1/15 to 6/30/16. This is very rare, as most of the institutions with Valpo's size endowment saw a decrease of 2% to 8% (this is unscientific, just looking at some of the schools on the same pages of the NACUBO report - look at Illinois Wesleyan at -7.8%, or John Carroll at -8.5% for example).

I'll do some back of the envelope calculations: The average rate of return for all endowments was -1.9%, and for institutions that have endowments between $100M and $500M, the average rate of return was -2.4% over the period (this is the investment return net of fees, excluding any withdrawals to the endowment).  If we assume that Valpo's rate of return was similar to its peers, it would reflect a loss of 4.9M. Then, subtract any spending from the endowment to fund university operations, salaries, chairs, etc - a rule of thumb might be to budget 4% of the endowment to fund these expenses in any given year, so this works out to spending of 8.2M.  By these rough calculations, for Valpo to show an increase, it would have to have received contributions of 13.7M over the period.

My numbers could be off, yet it sure looks like Valpo saw substantial and important contributions to the endowment over the period, well above what its similarly-sized peers achieved. My hope is that the capital drive would see this increase for the next years as well.

         

[vu72]

I agree that many of the gifts to the endowment are from estates (you die, then Valpo gets the money) and some may be after both husband and wife check out.  What we need to remember that many--read most, gifts are for specific uses, thus, we can't expect the Trustees to spend $20 million on ARC improvements from funds dedicated to, say, Chapel renovations. I would expect that some of the current gifts are in the form of Charitable Remainder Trusts. In these cases, funds are given now to the University with appreciated assets.  Given the recent performance of the stock market we may see more of these in the near future.  These funds then are sold by the Trustee and because of the non-tax status, pay zero capital gains or other taxes.  The University is obligated to distribute a preordained amount annually to the donors.  Any funds remaining after both parties (husband and wife) have died, then go to the University.  As a result the CRT gifts most likely aren't considered part of the endowment (perhaps some based on actuarial calculations).

Another way to give to the endowment may be through what is called a CLIT or Charitable Life Insurance Trust.  This again is a way to get the death benefit out of the donor's estate and would go to Valpo upon the death of the insured.

[crusadermoe]

Impressive descriptions '72.   Lots of interesting ways to route money to gifts.   

I do think (from past presentations by Pres. Harre) that money only counts in the NACUBO endowment count when the money is fully "owned" by VU and all the "strings" are removed from trusts etc. by death.

Best wishes to those thinking of giving and those helping them do it.

[valpo95]

The 2018 NACUBO report of endowments is out (with results as of June 30, 2017). This shows Valpo's endowment increased to $235.2M from $204.7M as of last year. This works out to a 10.7% increase. I note as well that this is the overall net increase, where donations would increase the value and any spending from the endowment would decrease the value. Valpo is #282 on the list of endowments, an increase from being #295 as of the 2017 ranking.  For some additional perspective, the 2012 report had Valpo at $163M and #301 in the ranking.

[vu72]

I think  many will see this and wonder why if we have raised 168,000,000 in the current drive that the total number isn't much higher.  The answer of course is most of the commitments are from estates and our alumni just live too long!  In glancing at a few numbers we still out pace schools like Butler, Drake  and Evansville who must be a little concerned with their number being only at 85 mil.  Belmont must have had a BIG donor pass as their number increased from 108 to 172, an increase of 58.6%!  Or maybe they put a big bet on Bitcoin!!

[crusadermoe]

That's a nice solid jump in cash endowment year over year.   $203 million rose to $235 million in one year.   

My guess is the "net" gain in value  of $32 million from June 2016 to June 2017 breaks out like this.  Round numbers easiest to illustrate.

$30 million increase generated from a market investment gains from the $203 million base.
$12 million in new cash gifts.

minus $10 million "spent".     = Net gain of $32 million.  A very good year.  Congrats!