Pitt assets drop, but still gain money in lean year

Investment losses didn’t keep Pitt’s endowment down in 2002.

Despite the loss of 5.3 percent… Investment losses didn’t keep Pitt’s endowment down in 2002.

Despite the loss of 5.3 percent of invested assets, the endowment ended the year with a $50 million gain over the previous fiscal year.

According to Arthur Ramicone, Pitt’s vice chancellor for budget and controller, only seven other endowments out of the 41 worth $1 billion or more posted positive returns.

Most of the 654 institutions surveyed by the National Association of College and University Business Officers ended the year with a drop in their endowments, losing an average of 6 percent.

Pitt’s endowment is influenced by four factors: capital markets, gifts from donors, the amount of money disbursed, and transfers made to university budgets.

The 4.6 percent gain in Pitt’s endowment is the result of the University’s massive fundraising campaign, Ramicone said.

Even so, Ramicone said the loss of 5.3 percent of invested assets is not something to get excited about.

“Some days I watch while we lose 50 or $60 million in one day,” Ramicone said. “Its enough to make you sick.”

Pitt employs the same kind of conservative investment strategy that the majority of Universities do, Ramicone said. That includes diversifying assets so that a drop in one area does not mean the loss of the entire portfolio.

Currently, Pitt allocates 30 percent of the endowment to U.S. corporate stocks, which is one reason the University’s endowment took such a hit last year.

And while a loss of 5.3 percent is not encouraging, it is much better when compared to major stock market indexes during 2002. Standard and Poor’s 500 Index, for example, dropped 18 percent in the same 12-month period.

The bad year had a harsher effect on many of the institutions with smaller endowments.

Both Pennsylvania State University and Carnegie Mellon University have endowments worth less than $1 billion. According to Ramicone, a smaller endowment means restriction from the “best and brightest investments” that are only open to endowments worth $1 billion or more. That means more money invested in marketable stocks and this year, that meant a drop in funds.

The NACUBO study reported that Penn State ended last year with an endowment that shrunk in total by 5 percent. And Carnegie Mellon lost 11.8 percent of theirs.

With the drop in endowments. universities may need to start looking for money in other places, but since Pitt is currently engaged in the “Discover a World of Possibilities” fundraising campaign, “we’re in pretty good shape,” according to Ramicone.

According to Arthur Novak Jr., interim vice chancellor for institutional advancement, “the capital campaign is right on target. But I think we’re going to start seeing more and more creative giving.”

In 2002, Pitt spent approximately 4 1/4 percent of the endowment to cover things such as the retaining of distinguished professors, scholarships and library expenses.

That amount is likely to stay the same, Ramicone said.

“We want to retain the purchasing power of the endowment,” Ramicone said. “The endowment of the next generation should have the same power as it does for current students.”