Vol. 38, No. 18
University endowment hits $2 billion
When University Treasurer Jim Nichols joined Ohio State in 1981, the endowment stood at $84.8 million. This July, that same amount - the income from an endowment that in April reached $2.023 billion - will be distributed for university use.
For the next 70 years, the fund grew mostly by gifts with little market appreciation. When Ohio State took over its management from the state treasurer in the 1960s, the endowment was barely $18 million. Since then, more modern portfolio management theory has yielded significant growth.
"The Endowment Fund is based on the concept that excellent programs require substantial, consistent and permanent funding," Nichols said. "The donor's motivation for establishing or contributing to an endowment fund is a desire to permanently enhance the university and its programs."
Today, about 3,700 individual accounts comprise Ohio State's endowment, which earns on average about 12 percent annually. To cover inflation and administrative costs, only about 4 percent of the income is disbursed to designated uses, typically in three large categories: 20 percent to chairs, professorships and eminent scholars; 17 percent to scholarships, grants and loans; and 20 percent to general education support and the libraries. The balance, Nichols said, provides funding for administrative, research and public service areas.
But the $84 million distribution, which according to Nichols is about 5 percent of the university's general operating budget, doesn't go as far as you might think. "A 4 percent distribution on an endowed fund of say, $100,000, only results in $4,000," he emphasized. Even for a scholarship, that's not a large payout, which is why Nichols and his staff work hard to preserve the original principal and strive for a good but prudent return.
They also ensure a fund is used for its intended purpose. More than 90 percent of the funds are restricted, meaning they are earmarked for certain uses.
But Nichols said the endowment does, in some ways, help offset tightening budgets and increasing costs to attend Ohio State. "The endowment allows the university to continue special programming that otherwise might have to be sacrificed to cover building maintenance, high utility bills and the like," he said. "The university also has a proud tradition of growing the financial aid pot proportionally with tuition increases, and some of that money does come from the endowment."
Endowment categories range from a minimum of $25,000 to $1.5 million. Big gifts usually come in pieces and happen over many years, although College of Law benefactor Michael Moritz gave the single largest gift to date, $30 million.
"People who give to the university give small amounts over a long period of time before they give anything of size," Nichols said. "The average,
While many schools operate without endowments, Ohio State's fund ranked as the 27th largest endowment in the country last June for public and private schools, and 6th among publics. By comparison, Harvard's endowment sits at $25 billion; Yale's at $15 billion, and the University of Texas at Austin around $12 billion. Of Ohio's publics, only the University of Cincinnati ($1 billion) and Miami and Ohio universities, with several hundred million each, are close.