Profits from Dartmouth's endowment rebounded back into black ink with a 2 percent gain over the 2003 fiscal year. However, the College's endowment was the only one in the Ivy League to decrease in market value over the 2003 fiscal year, according to the latest annual survey by the National Association of College and University Business Officers.
Dartmouth's $2.1 billion endowment decreased in value by approximately $65.4 million, although the 3 percent decline does represent an improvement over the prior year's 9.4 percent decrease.
Last year's 2.2 rate of inflation outpaced the profits Dartmouth earned from its investments, contributing to a net decrease in market value.
The recent study also pointed out that Dartmouth likely spent roughly 5 percent of its endowment over the year, which would have further offset its nominal gains.
"We did distribute more money from the endowment than we earned," Vice President of Finance Julie Dolan said, "thus the market value of the endowment declined. For the last two years, though, we have had actual negative returns, so this is an improvement over that."
The endowment is of particular importance to Dartmouth, as 37 percent of the College's annual budget is drawn from the endowment, as compared to most universities that only count on their endowments to cover five to 20 percent of their annual costs, according to David Lyons, senior fellow at NACUBO.
"The good news is, we've turned the corner," Lyons said. "But the state budgets are in terrible condition, so at the [public universities], at least, this is definitely going to put pressure on tuition, and fund-raising will be pretty essential for everyone. I think the alumni will be getting a lot of letters."
In years when the endowment is on the decline, the College is forced to cut into the endowment's principal, as it has for the past three years. Additionally, budget cuts have become a way of life while the endowment recedes, and last year's 4.9 percent tuition increase was one of the largest single-year increases in recent history.
College officials are optimistic about the endowment's immediate future. Next year's projected budget is based on expectations of a five percent gain in the 2004 fiscal year. Vice President of Finance Adam Keller said he hopes for gains of eight percent in the following years and ultimately expects to return to the 10 to 12 percent yields the College has enjoyed in the past.
The average university endowment yielded a 3.0 percent increase over the 2003 fiscal year -- the first positive gain in the last three years. However, that increase was offset by the 2.2 percent inflation rate for the same twelve-month period and an average annual endowment withdrawal rate of 5.4 percent.
"Both factors lead most participants to experience a decline in their endowment's investment earning potential," the report stated.
In 2001, university endowments went negative, losing money at a median rate of 3.7 percent.
The 2002 fiscal year was no easier on the institutions, as endowments continued to lose at an average rate of 6.4 percent.
Not every institution has been hit so hard. Harvard, which has the largest endowment in the nation -- currently at over $18 billion -- saw a 9.8 percent increase in the size of its endowment, gaining over $1 billion in the 2003 fiscal year.
The second and third largest endowments in the country, Princeton and Yale, each gained a respectable 4.9 percent over the same twelve-month period.
Only Cornell, which saw its endowment hold steady this year, was anywhere close to Dartmouth's negative showing in the recently-released rankings.
According to Dolan, Harvard can make that kind of profit when every other school is stagnant for two reasons -- they start off with a lot more money than every other university in the country and "they use very aggressive investing and hedging policies.
They leverage the $18 billion they already have so they can invest even more," Dolan said.
