Democrat & Chronicle quotes Humphreys on risky investments in Rochester endowments
As the endowments of the University of Rochester and Rochester Institute of Technology have rebounded to prerecession levels, there are increasing questions about how they are being invested and spent.
Some believe that both schools should be spending more of their endowments on financial assistance and day-to-day operations, thus reducing the dependency on tuition. 6% of UR’s annual budget is funded by its $1.7 billion endowment, compared to an average 16% at schools with similarly sized endowments. For RIT, 4% of its annual budget comes from its $669 million endowment, compared to a 12 percent national average for its size.
On the investment side, both schools have been increasing the percentage of alternative investments in their portfolios, which include hedge funds and private equity. Although these types of investments can provide a greater return, they require less disclosure and can be more difficult to sell, particularly during a financial crisis.
James Goodman quotes Joshua Humphreys, president and senior fellow at Croatan Institute, who worries that too much emphasis is being put on risky investments that move colleges away from their educational mission: “It took the fiscal crisis for many of those responsible for these strategies to take a fuller measure of risk they were taking."
Goodman also quotes Dan Apfel, who is a UR graduate, executive director of the Responsible Endowments Coalition, and on the Board of Advisors for Croatan Institute: "It's socially responsible for colleges and universities to look at their mission and examine their investments." Although UR does not invest in companies that supported the Sudanese government, neither UR nor RIT have divested in fossil fuel stocks.
For more information, see "Educational Endowments and the Financial Crisis"
and "Environmental, Social and Governance Investing by College and University Endowments in the United States."
Source: James Goodman, “Funding the future: Endowments grow at UR, RIT,” Democrat & Chronicle, February 23, 2014.