Indiana colleges see slow rebound in endowments

INDIANAPOLIS (AP) -- Indiana college endowments are making a long climb back from the recession, but the recovery has been slow and frustrating for schools facing budget cuts and pressure to limit tuition increases and provide more financial aid.

Endowments at the state's two largest public universities, Indiana University and Purdue University, rose above pre-recession levels by June 30, 2011, according to the National Association of College and University Business Officers. Purdue's climbed 15 percent, to $2 billion, while IU's inched up 2 percent, to $1.6 billion.

But performance at other schools varied widely, the Indianapolis Business Journal reported. Indiana Wesleyan University's endowment was 29 percent higher than it was in 2008, while Ball State University's was 26 percent lower.

"You see a lot of universities going all over the map," said Ken Redd, the association's director of research and policy analysis.

A combination of strong investment returns and gifts helped push the total value of Indiana's 20 largest college endowments to $12.5 billion as of June 30, 2011, up 0.9 percent from the 2008 fiscal year. Figures for the fiscal year ending June 30, 2012, will be released early next year and are expected to show more gains.

Some schools still have a steep road ahead. Fourteen of 20 Indiana schools the IBJ examined were still below where they were three years earlier, and 15 grew more slowly than the state's average.

Indiana isn't alone in its plight. U.S. college endowments nationally were down 4.7 percent from 2008 levels at the end of the 2011 fiscal year.

Endowments are created when university officials collect donations, invest the money and then decide how to use the returns.

Public universities tend to use their endowments for student aid and academic programs. Private schools often use them to offset payrolls and other operational costs.

Redd said many universities have ramped up their fundraising efforts to help expand their endowments. Marion-based Indiana Wesleyan is one of those schools.

Executive Vice President Keith Newman said the private school launched a campaign in July 2010 that included a university match of donations. The school's endowment has grown 29 percent, to $69 million.

The money has helped pay for a new seminary and has provided several scholarships.

"Some of this is because the cost of education has just risen so dramatically we feel like the endowment is the key to our future," Newman said. "I think it's fair to say we have a wide range of socio-economic backgrounds at our school, but the heart of our school is really middle class."

Scott Seidle, chief investment officer at Purdue, credits the school's investment strategy for the growth of its endowment, which reached $2 billion -- 15 percent higher than it was in 2008.

The school raises an average of $30 million to $35 million a year in donations, and Seidle said the university combines traditional investments like stocks with alternatives such as private equity.

Indiana University also turned to alternative investments and made other decisions that enabled its endowment to close the 2011 fiscal year at $1.6 billion, 2 percent above where it was three years earlier.

"Everybody was just very sober-minded going through that. It would have been easy to hit the panic button and say, `We've reached our limit. We don't like the way the market looks. Let's sit this out for a while,"' said chief investment officer Gary Stratten.

"Had we panicked out, it would have been something we would have been digging ourselves out of for decades."

Ball State found itself in a bind when the value of its endowment dropped. The endowment's value dropped 29 percent, but the school couldn't reduce spending an equal amount because it had already committed $10 million to cover part of the costs of a new recreation and wellness center.

Ball State's endowment stood at $140 million at the end of the 2011 fiscal year, $50 million less than it had been three years earlier.

David Bahlmann, CEO of the Ball State University Foundation, said endowments are for spending, but prudently.

More than 40 percent of Ball State's distributions go to students, he said.

"Many of (the foundation's) products bring students here," he said. "If you don't offer the scholarship, you don't say, `You have to go home until the market comes back."'

Information from: Indianapolis Business Journal