Baylor in Top 6 Percent of U.S. Universities on Endowment Investment Return

Jan. 23, 2006

by Alan Hunt, (254) 710-6271

Baylor University's investment return rate of 14.2 percent on its endowment for fiscal year 2005 ranked the university in the top 6 percent of all U.S. colleges and universities (44th out of nearly 750 institutions), according to information released Jan. 23 by the National Association of College and University Business Officers (NACUBO). The median investment return of institutions surveyed was 9.3 percent.

With its $750 million endowment, Baylor is ranked in the top 100 U.S. colleges and universities with the largest endowments, according to the annual NACUBO Endowment Study (NES), which is the largest and longest running voluntary survey of higher education institutions and their endowment holdings. It showed Baylor's market value of endowment assets at $750,237,000 in FY 2005, which ranks Baylor in 77th place. Baylor's fiscal year ends May 31.

In addition to Baylor's 14.2 percent investment return rate, NACUBO also reported that Baylor's market value of endowment assets increased 11.6 percent, or about $77,896,000, from 2004 to 2005. An endowment's change in market value from one fiscal year to the next, according to NACUBO, includes several factors, such as growth from gifts, reductions due to expenditures and withdrawals, as well as investment returns.

"Baylor had an outstanding return in Fiscal 2004-2005 finishing with a return that beat the S&P 500 by 10 percent and beat the median school in our peer group by 3 percent," said Jonathan D. Hook, Baylor's chief investment officer. "It was a very difficult investing year with a low return environment, rising interest rates and rising energy prices. Given that, it was very gratifying to see our performance finish well within the top decile of colleges and universities."

A total of 746 institutions from the United States and Canada with $299 billion in endowment holdings took part in the 2005 NES, the largest group in the 34-year history of the study. The study used information collected and calculated by TIAA-CREF, a national financial services organization.

"Earnings from endowment investments are a critical primary funding source for both independent and public institutions," said NACUBO president James E. Morley Jr. "Endowments -- and private financial support in general -- are one of three primary revenue sources for colleges and universities; the other two being public funds and tuition income. Endowment income is an increasingly vital funding element of many college and university budgets and will undoubtedly remain so for the foreseeable future."

"Our detailed analysis of the 2005 NES data indicates that institutions should look beyond their asset allocation mix to understand long-term investment success factors," said Nancy Heller, TIAA-CREF asset management managing director. "We found that while asset allocation is critically important, manager and strategy selection, as well as resources, also matter."

TIAA-CREF is a national financial services organization and the leading provider of retirement services in the academic, research, medical and cultural fields.

NACUBO, founded in 1962, is a nonprofit professional organization representing chief administrative and financial officers at more than 2,100 colleges and universities across the country. NACUBO's mission is to promote sound management and financial practices at colleges and universities. More information on NACUBO can be found at www.nacubo.org.

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