Warwick avoids serious endowment fund losses

The endowment funds of several UK universities have dropped significantly in value as a result of the current economic downturn.

Many universities have invested their endowments heavily in the stock market, and have had millions wiped off the value of their stocks. Oxford and Cambridge rely on their endowments more heavily than other universities, and so are experiencing the greatest hardships.
The University of Warwick, however, only has a marginal amount invested in stocks, and its endowment does not form a significant proportion of its overall income. In the 2007 to 2008 academic year, income from the university’s endowment fund represented only about one per cent of its overall income.

Though the university has around a third of its endowment funds invested in stocks, it does not expect a dramatic reduction in the value of those stocks or in its overall income.
The University told the Guardian, “we don’t plan any other cuts or changes” because of the possible decrease in the value of its investments.

Endowments are funds that are donated to universities by charities or by individuals, many of whom are alumni of the university to which they donate.

Endowments usually are given for a specific purpose, for example, to fund a new building, research project, or scholarship.

They are frequently invested by universities, generally in stocks or bonds, to generate a steady income stream rather than a one-off influx of cash.

Most UK universities, including Warwick, do not rely on donations from alumni or income from investments for a large part of their operating budgets.

Universities in the United States, however, rely extensively on their endowments, and have been hit much harder than universities in the UK. Harvard University, for example, has seen billions wiped off the value of its endowment.

Because endowments are designed to be long-term investments for universities rather than a large part of their yearly incomes, it is unlikely that the decline in the stock market will have a significant impact on UK universities’ budgets in the near future.

If the stock market rebounds in coming years, the overall value of endowment investments will remain relatively unchanged. The director of finance at King’s College London told the Guardian, “universities … can manage short-term volatility.”