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Archive for Saturday, October 4, 2008

Woeful economy hinders endowment

Baker, KU say they can ride out downturn

KU endowment is feeling the effects of the sagging economy, but KU Endowment President Dale Seuferling says that diversification in its investment portfolio allows the $1.2 billion endowment fund to ride out short-term tough times.

KU endowment is feeling the effects of the sagging economy, but KU Endowment President Dale Seuferling says that diversification in its investment portfolio allows the $1.2 billion endowment fund to ride out short-term tough times.

October 4, 2008

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University endowment funds are not exempt from the effects of a sagging economy.

Endowments at both Kansas University and Baker University reported slowdowns in donor giving and smaller overall available funds. Leaders at both universities said they anticipated being able to weather the downturn and look forward to better economic times.

KU Endowment President Dale Seuferling said endowments function differently from an individual with a 401(k) plan who is preparing to retire.

That individual nearing retirement will need to start getting money out of the market now, Seuferling said, while, for an endowment like KU's, which has more than $1.2 billion in market value, it's easier to ride out tougher times.

"Our objective is to have diversification in our investment portfolio," he said. "In doing so, it does present us the opportunity to weather short-term market declines."

Also, the endowment fund plays it relatively conservatively, not over-exerting itself in good economies to allow it to maintain spending in the bad ones.

"We don't want to have a decline in spending," he said.

Seuferling said KU Endowment typically operates in three-year planning periods, during which leaders expect the market to make some sort of uptick. Practically speaking, it would take an extended multiyear slump to have any dramatic impact on spending, he said.

The company overseeing the endowment funds in the market is always looking at five-, 10- and 20-year periods and beyond, Seuferling said, to provide a steady and stable stream of revenue for the university.

"We have a much longer time horizon than someone looking to retire," he said.

The sagging economy also means that potential donors may have less to spend on donations.

"You have to use common sense about the environment that you're in," Seuferling said.

Often, the university will try to structure a gift over a longer time period for donors, or will try to set up a time at a future date to discuss a potential donation again.

"You have to deal with it and work within that environment," Seuferling said.

Patrick Mikesic, director of development at Baker, said the university's latest available figures showed more than $33 million in the school's endowment fund.

That's down from a high of about $37 million, he said.

"That's a pretty hard pill to swallow," Mikesic said, although he was optimistic the fund would rebound when the market rose again.

It's unlikely that the university will suffer ill effects from the short-term loss of funds, Mikesic said, unless the market enters a prolonged downturn - something he predicted was unlikely, at least to the point that it would significantly affect the way the endowment fund operates.

Mikesic, too, said the approach with potential donors changed in a difficult economy. He said he's seen a change in both the high-dollar donors and the ones that give smaller annual gifts.

"They don't have that $100 to give anymore," he said of some annual givers. "They're putting it in their gas tank."

That causes a shift in how the university solicits donations, Mikesic said.

"We tend to focus more now on cultivating relationships," he said. "We try to be a little less aggressive."

Comments

roger_o_thornhill 6 years, 5 months ago

What, pray tell, does the Endowment Assn. spend its moolah on anyways? I don't think many people know much about it and assume they are the "private money" part of the salaries of the top earningest folk on campus.

Godot 6 years, 5 months ago

Didn't the endowment make a 20% return last year? How do you do that while being conservative?No doubt, KU Endowment had investments in mortgage backed securities, and it is among many institutions that took on these risks to get a higher return, and that will now be sheltered from the consequences, thanks to the $850bn bailout.This is an example of how a Wallstreet bailout supposedly helps mainstreet.

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