British university endowment funds grew by twice the rate of inflation last year but they are still minnows compared with their US counterparts.
Between 2003 and 2004, the value of UK endowments rose by 8 per cent on average, according to an analysis by The Times Higher of data from the Higher Education Statistics Agency.
As of July last year, British institutions held a collective £2.6 billion of endowment assets. The three richest universities - Cambridge, Oxford and Edinburgh - between them hold almost half of this value.
By comparison, Harvard University alone had an endowment valued at $22.6 billion (£12 billion). Such wealth is not only the preserve of US Ivy League institutions. Earlier this year Ohio State University's endowment was $1.7 billion (£900 million).
Although a number of British universities have endowment funds running to tens of millions of pounds, the income that the sector generated overall from its £2.6 billion-worth of total assets was just £236 million. This is up fractionally on last year and amounts to just 1 per cent of overall income.
Eric Thomas, vice-chancellor of Bristol University and chairman of the Higher Education Endowment Task Force - which reported last year - said building up endowments should not be a major priority for UK universities.
He stressed that they were a long-term game and said that universities should be concentrating on professionalising the way they dealt with donations and alumni relations.
"We saw spectacular gains in the US universities on the back of the stock market in the latter part of the previous century. But we're unlikely to see a repeat," Professor Thomas said.
"At the moment, endowments are not returning all that well - say 4 per cent. If you had £2 million, you could spend it on lab refurbishments or on the endowment - this would return £80,000 a year,Jand most people would prefer the former."
His comments were echoed at Oxford Brookes University, one of ten universities that report zero endowments in their annual accounts.
A university spokesperson said: "Part of Brookes' strategy is to be self-sustaining. We're a long way down the road of fundraising, but that doesn't mean building endowments.
"New projects don't happen because of endowments or nest eggs. They happen because of cost-cutting and investing in buildings."
Reading University significantly increased the value of its endowment, up by 55 per cent to £77 million, putting it in the top ten best-endowed universities. A spokesman for the university said that the increase had come from the proceeds of the sale of surplus land.
Nottingham University was one of the 20 universities that saw endowments decrease. The value went down by 4 per cent to £34 million.
The university said that it had used £2 million of general endowments to support the commercialisation of research and the exploitation of intellectual property.
Derby University was the richest post-1992 university, sitting on endowment assets of about £3 million, almost twice as much as that held by the next richest new university, Gloucestershire.
A Derby spokesman explained that the money had come from the school and college trusts that formed the university in 1992. He said some universities would list such funds as "reserves".
At the end of last year, the Government announced a £7.5 million match funding scheme designed to help universities kick-start their endowment funds. Universities UK is consulting on how this should be distributed. The money will be used to build institutions' fundraising capacity.
Top 10 endowments (2004)
% increase since 2003
Top 10 income from endowments
% increase since 2003
CHARITY WITHOUT STRINGS
Universities are among the top recipients of donations in the UK, according to Universities UK.
UUK recently held a seminar with charities that looked at jointly lobbying the Treasury to change tax law to encourage regular donations over the medium to long term.
For some institutions, investing in running an annual appeal that will regularly bring in £50,000 a year in non-specified funds is more worthwhile than chasing large donations, which are few and far between.
A donation is usually given with no strings attached, whereas an endowment may have conditions.