Harvard breaks through the $20bn barrier

Harvard University announced last week that its endowment had passed the $20 billion mark, rising to $22.6 billion (£12.6 billion) for the year to the end of June. This is 25 times larger than that of the best endowed UK university.

The world's largest academic investment fund provides the US institution with an annual income of £630 million.

Harvard's latest figures show that its endowment had grown by more than a fifth compared with the previous year. The year before, the fund grew by more than 12 per cent.

Harvard's financial resources, the largest for any US university, dwarf even the richest UK universities, none of which has endowments topping £500 million.

Cambridge University - believed to be the best endowed in the UK - estimated its endowment investments were worth about £450 million in June 2004, with growth of about 8 per cent over the previous year.

Universities tend to allocate 4 to 5 per cent of their endowment fund each year for spending.

Jack Meyer, president and chief executive of Harvard Management Company, said: "The past two years have been extraordinary. (But) the cloud in this silver lining is that we don't expect the good times to persist."

He said growth was expected to slow to an average of about 8 per cent over the next decade.

The high growth is attributed to a strong US economy and a low-valued dollar, making investments in overseas currencies lucrative. Less than a tenth of the growth is due to new gifts and donations.

Cambridge said it was reviewing its approach to investment and might adopt the model that many US universities use, with higher exposure to alternative investments such as hedge funds and private equities.

In May, the Higher Education Endowment Task Force, chaired by Eric Thomas, vice-chancellor of Bristol University, called for a change in the UK tax regime to encourage charitable donations.

Peter Lampl, a member of the task force and chair of the Sutton Trust, said establishing a culture of annual giving among alumni was key to building endowments .

He said: "You don't get a gift of $300 million just by calling an alumnus and saying, 'Oh, you've been doing well!' Big gifts come almost exclusively from people who have been giving for many years."

More than half of Harvard alumni donate to their alma mater annually, compared with about a fifth overall in the US. Fewer than one in 20 UK graduates regularly gives money to their universities.