Investors have limited control over the returns their portfolios generate. They have more control over their spending. That doesn’t make it easy.
Compared to some earlier periods, volatility in the financial markets has been relatively tame over the past decade. Still, endowment returns have varied widely from year to year. Inflation has been relatively benign. But the largest component in many educational institutions’ budget is faculty salaries and benefits, which have risen more steeply. Gifts, too, have varied widely and the Tax Cuts and Jobs Act of 2017 introduced an unknown dynamic into the giving equation by limiting tax deductions. All of these factors have a significant impact on the spending levels of colleges and universities and other nonprofits. Given the challenges of this environment—and the one that may be anticipated in the years ahead—a session at Commonfund Forum 2019 was dedicated to looking at the various stress factors impacting annual spending from endowment.
The discussion was led by Lucie Lapovsky, Principal, Lapovsky Consulting, and former CFO of Goucher College in Maryland, and Steve Snyder, Manager Director and Head of Relationship Management at Commonfund. This Commonfund Forum Spotlight infographic highlights some of the main points of the session.
Large institutions represent endowments over $1 billion while small institutions represent $51-$100 million unless otherwise indicated.
Source: 2018 NACUBO-TIAA Study of Endowments.