Top 5 Largest University Endowments
By David Gorton
As of June 2016, the five largest university endowments were all larger than $20 billion. Although the average university endowment returned only 2.4% in 2015, these five universities still enjoyed investment returns in the hundreds of millions of dollars, including Harvard’s $1.6 billion endowment distribution in 2015. These donations finance a material portion of the school’s operations, as universities with an endowment over $1 billion typically rely on this contribution fund to cover 17% of annual spending.
Harvard University – $36.4 Billion
Harvard University owns the largest academic endowment in the world. By comparison, Harvard’s endowment fund is almost $3 billion larger than the total market capitalization of HP Inc. (NYSE: HPQ), which is the fifth-largest technology company in the world and ranked as having the 38th-most-valuable brand in the world in 2016. Harvard maintains its endowment through the use of over 13,000 separate funds, and endowments made up 33% of the school’s operating revenue in 2015. Harvard schools are specifically referred to for roughly 80% of endowment donations, with the Radcliffe School and Divinity School relying the heaviest on revenue from endowments in 2015. The two main classifications of endowment funds support facility and students through professorships, financial aid for undergraduates and fellowships for graduate students. Since 1974, Harvard’s endowment has been managed by Harvard Management Company.
Yale University – $25.6 Billion
Yale University’s endowment also ranks among the world’s largest university endowments. Seventy-five percent of Yale’s endowment contains gifts restricted to provide long-term funding for the school. Yale reinvests the other 25% in the endowment. From 1985 to 2015, Yale’s endowment investments yielded 13.9% and resulted in $27 billion in revenue. Endowment investments were responsible for over one-third of the school’s operating revenue in 2015.
Yale’s School of Law earns more than 50% of its revenue support through the endowment, and Yale’s School of Management will begin the 2017 fiscal year with $35 million from the fund. Yale’s art gallery does not impose any fees for spectators. Instead, it relies heavily on endowments and generally receives 62% of its revenue from the donation pool. Finally, 75% of Yale’s library operations are paid for by endowment distributions.
University of Texas – $24.1 Billion
The University of Texas Board manages four major endowment funds for the University of Texas System. This system encompasses eight main academic institutions and six health institutions. The four main endowment funds are the Permanent University Fund, Permanent Health Fund, Long-Term Fund and Separately Invested Fund. The Permanent University Fund supports 19 smaller institutions within the University of Texas and the Texas A&M systems, and contributes financial support to approximately 180,000 students. The Permanent Health Fund contributes revenue to medical research, health education, public health, nursing and treatment programs. The UT System endowment temporarily overtook Yale as the second-highest endowment in 2015, due largely in part to favorable oil prices and hydraulic fracking operations.
Princeton University – $22.7 Billion
Almost 80% of Princeton’s scholarship funding comes from endowments. In addition, other areas of the university that receive endowment support include fellowships, professorships, research and teaching programs. Between contributions, capital gains and interest revenue, Princeton University’s endowment experienced an annual growth rate of 13% between 1990 and 2015. Princeton’s success relies heavily on this annual growth, as almost 50% of 2014-2015 fiscal year revenue was attributable to endowment distributions. Princeton maintains a target spending rate between 4 and 6.25%.
Stanford University – $22.2 Billion
Stanford University maintains over 7,000 separate endowed university funds. More than half of these are designated for a specified purpose. Approximately 21% of the revenue in the budget for fiscal year 2015-2016 was attributed to endowments. The Stanford Management Company, established in 1991, oversees the operations and maintenance of the endowment funds. Stanford’s endowment fund covers a portion of the university’s operating expenses, while a portion of earnings is retained and reinvested in the endowment.