A check-in on the endowment: Duke grows financially but looking to raise new funds

Photo Courtesy of Wikimedia Commons
Photo Courtesy of Wikimedia Commons

Duke is in good financial shape, but the university is looking to raise money to expand programs like financial aid. 

During a down year for investments at universities around the country, Duke’s endowment grew to a record size of $8.6 billion on a return of 6.9%. Nevertheless, Tim Walsh, vice president for finance, said that the University is planning a fundraising campaign as it looks to expand financial aid, professorships and other initiatives. 

“Duke’s overall financial status is very strong,” Walsh said. “And the challenge we have is we have a great deal of ambition, a lot of new priorities, things we want to do, and we don’t have the flexible resources to do those things.”

Most money in the University’s endowment is earmarked for specific purposes, Walsh said, which makes it hard to use it flexibly. 

According to the 2018-19 endowment snapshot, roughly 22% of Duke’s endowment is earmarked for financial aid, 19% for professorships and 10% for instruction and research. A little more than a quarter is intended for “unrestricted support of the university or one of its schools or budget centers.”

In order to expand programs, Walsh said that Duke is preparing for a fundraising campaign in the next few years. The initiative will focus on constructing new buildings, faculty advancement—especially in the sciences—and financial aid.

“At least those three components are almost non-negotiable,” Walsh said. “They have to be in there.” 

The reliance on philanthropy is not a new phenomenon. In a 2017 Academic Council meeting, Walsh said that most money allocated to new programs comes from fundraising initiatives like Duke Forward, Duke’s most recent capital campaign.

Amid lower returns, donations made the difference

The endowment saw a lower return than last year and the year before, when it grew by 12.9% and 12.7%, respectively. The drop came amid a slow year for university endowments around the country.

Both Harvard University and the University of Pennsylvania’s endowments returned 6.5%, The Wall Street Journal reported, while the Massachusetts Institute of Technology experienced an 8.8% return on its endowment. On average, a preliminary estimate found that schools with more than $1 billion in assets resources saw a return of 5.8%.

Some universities fared better and some did worse: Brown’s endowment returned 12.4%, according to The Wall Street Journal; Columbia only saw a 3.8% return. Harvard’s endowment, the largest academic one in the world, continued to grow despite the muted return and reached a value of $40.9 billion, the Journal reported. 

Jack Bovender, chair of the Board of Trustees, told The Chronicle last month that economic conditions were to blame for Duke’s low returns.

“I think that it reflects what’s going on in the economy over the last two or three years,” Bovender said. “Are we satisfied at 8.6 billion? The answer is no. We need to grow.” 

Duke spent $647 million from the endowment in the last fiscal year, The Chronicle reported last month, which is about 7.5% of the endowment’s value, outweighing the year’s 6.9% returns. Donations to the endowment allowed it to continue to grow despite the imbalance, Walsh said. 

The long-term view

A low return in one year may not be a reason for concern. Duke uses a three-year trailing average of the endowment’s value to help determine spending, according to Michael Schoenfeld, vice president for public affairs and government relations, which mitigates the impact of large fluctuations on the University’s ability to plan for the future.

“The investing environment is volatile, for sure, and taking a snapshot… of any one particular time is going to be very different year to year,” Schoenfeld said.

In order to ensure the endowment’s long-term growth, Walsh said that Duke Management Company (DUMAC) aims for an average return of around 7.5% per year, allowing the university to spend roughly 5% of the endowment’s value while accounting for anticipated inflation.

The endowment’s growth could further decrease or dip into the negatives, as many CFOs and economists believe a recession is imminent. In 2008–2009, during the height of the last global recession, the endowment’s value fell $1.68 billion, from around $6 billion to $4.4 billion.

A recession could hinder Duke from expanding programs like financial aid in the absence of outside philanthropy, Walsh said, although he emphasized that the university’s need-blind admissions policy was in no danger.  

Even in the event of a recession, Schoenfeld said that Duke would protect its most important programs. 

“We’ll make a thousand different adjustments, for that the university protects the core mission, which is teaching, research, financial aid—the student experience,” he said.

Matthew Griffin

Matthew Griffin was editor-in-chief of The Chronicle's 116th volume.


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