Endowments suffer 'huge hit'

July 18, 2003

University endowments have fallen in value by 20 per cent in two years, hitting prestigious universities and partly offsetting increased government investment.

The first national audit of university wealth since the last THES survey in 2001 reveals that between July 2000 and July 2002 the fall in the value of the stock market brought Cambridge's endowments down by 26 per cent, or £170 million, and Oxford's by 24 per cent, or £85.2 million.

The Oxbridge endowments dwarf those of other universities.

Edinburgh University's endowment, the third largest in the UK, fell by 13 per cent. Glasgow's endowment, the fourth largest, dropped by 29 per cent from £128 million to £91 million.

Michael Yuille, director of finance at Glasgow and chairman of the British Universities Finance Directors' Group, said: "In 2000 our endowment was 31 per cent of our total funds. Now it is just 22 per cent. This is a huge hit and brings into question the government's push to make universities more reliant on endowments."

A THES analysis of balance sheets for 1999-00 and 2001-02, however, shows that overall UK higher education has increased its net assets, or total funds, by 5.7 per cent.

Fixed assets alone - money from buildings as well as new investments - rose by 16.3 per cent. Gill Ball, director of finance at Birmingham and secretary of BUFDG, said: "This reflects a commitment of capital grants through the Joint Infrastructure Fund and the Science Research Investment Fund. The fall in endowments lessened the impact of this investment on net assets on balance sheets."

Eric Thomas, vice-chancellor of Bristol University and chair of the task force on giving set up as a result of the white paper, said that the issues facing endowments were no different from those facing other long-term investments, such as pensions. "Whilst the stock market has not performed well recently, there is good reason to assume that this will not continue and in fact the FTSE 100 has risen by almost 500 points since March," he said. "Our ambition is to identify mechanisms to grow those endowments and the single most important issue the task force will face is who should get the tax back on gifts."

In the US it is the donor, in the UK it is largely the recipient.

Mike Smithson, director of the development office at Oxford, said: "A US-style structure would cut giving income by 22 per cent immediately, and the view of all the Golden Triangle University Development Directors is that we would not make this up."

Sir Peter Lampl, chairman of the Sutton Trust, said: "The government could make charitable giving considerably simpler by replacing the gift aid scheme, which despite recent changes is still unnecessarily complicated, with one where donations are simply deducted directly from income as in the US. In the US the donor claims back all the tax benefit, which provides a significant incentive to give."

The THES analysis also reveals country differences. In terms of net assets, Wales has seen a significant increase of 10.9 per cent between 1999-2000 and 2001-02. England has seen a rise of 6.4 per cent, Scotland of 1.4 per cent and Northern Ireland of just 0.1 per cent.

Ms Ball said: "Because the number of universities in Scotland and Wales is much smaller big changes at one university can seriously hit the balance sheet of the whole country."

In Scotland, Edinburgh University's decision to take out a £60 million bond accounted for a third of the borrowing of the entire Scottish sector. The increase in Welsh net assets was largely due to one institution, the University of Wales Institute, Cardiff, carrying out a revaluation of its assets.


University wealth: subscribers click here for the 2003 tables.

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