The University’s endowment grew 5 percent over the last year, a $70 million rebound that still kept GW’s finances plodding along and administrators planning for stubbornly small gains in the near future.
The University’s treasurer said he was pleased that the $1.37 billion endowment grew slightly – an improvement after it eroded by 2.25 percent last year. But he said he does not expect the University’s nest egg to keep pace with GW’s boom years.
“There were years when you were having 20 or 30 percent returns. That’s not in the cards right now. It’s much more difficult to get those kinds of returns in the recent past and probably will be in the future,” Executive Vice President and Treasurer Lou Katz said.
He said GW’s total endowment is likely to remain near $1.37 billion for the next several years as global markets continue to stabilize and GW funnels more money into academic programs as part of its likely $400 million strategic plan.
With endowment growth slowing, pressure will mount on GW to fundraise more heavily. The Board of Trustees allows GW to draw about 5 percent of its endowment for its operating budget to fund academics and financial aid. GW used about $68 million of its endowment last year.
The small endowment growth comes on the heels of the University’s first fundraising decline in five years. GW raised $103 million last year, a 14 percent decline from the year before’s record fundraising haul, which included one of the biggest gifts in GW’s history.
Last year, the University spent about $20 million more than it earned as it paid for its most expensive academic and residence halls to date.
Katz said this year’s gains were due to increased investments in domestic companies – a shift in strategy that began a few years ago.
But the markets – especially overseas – are still volatile, and Katz said the gains from domestic firms this year come in part from a post-recession mentality that cuts out workers and forces companies to work more productively, increasing profit margins.
GW’s endowment – the financial foundation for the University – is relatively small compared to schools it calls its peers. Lee Gardner, the finance and policy editor for the Chronicle of Higher Education, said large endowment returns are vital to fund institutional transformations, like the ones GW is pushing through in its 10-year strategic plan.
“It’s important for any school with a strategic view to grow its endowment,” Gardner said. “Endowments can be important to institutions’ financial stability and also provide some financial cushion.”
Ken Redd, director of research at the National Association of College and University Business Officers, said GW’s foreign investments likely contributed to the sluggish growth because “internationals did not do well last year.”
“At some point, the international markets will turn around as well, we just don’t know when,” Redd said. “That could be three to five years from now, but who knows? That’s the optimistic view.”
American stocks performed better than the previous year, though Redd said universities should still be wary while managing their endowment in the “volatile investment environment.”
“Financial markets have been really stressed. Risk is going to be the biggest challenge for institutions moving forward,” he said.
GW has also invested vigorously in real estate around Foggy Bottom in recent years, which has offered consistently solid returns compared to more shaky investments in national or global firms.
