NCSU endowment headed toward major milestone

Several years of record-breaking fundraising and strong investment performance have pushed N.C. State University to the verge of joining one of the most exclusive clubs in higher education: American universities with endowments of more than $1 billion.

An endowment is a university’s investment portfolio and helps pay for day-to-day operations. A heftier one generates more income to spend on things such as financial aid and retention of top professors, and means an institution is better able to weather reductions in state funding like those North Carolina’s public universities have faced in recent years.

“The larger the endowment, the greater the amount of payout from the endowment that gets invested in the operating budget of the university,” said Brian Sischo, NCSU’s vice chancellor for university advancement. “So in an environment in which we have seen continued decreases in state funding, it’s important to see increased levels of endowment payout to fund things we see as important to the success of the university.”

Last year, endowments topped $1 billion at just 82 of the nearly 900 U.S. universities tracked by the National Association of College and University Business Officers. Only three were in North Carolina: Duke and Wake Forest, both private schools, and UNC-Chapel Hill.

It’s unclear when NCSU will hit the milestone. That depends on the financial markets and decisions by major donors, among other things, but it’s within reach before June 30, the end of the fiscal year, Sischo said.

NCSU’s endowment topped $885 million this past June 30, up from $503 million in 2010, and the university is in the opening phase of a major fundraising campaign.

Benefits to students

Topping $1 billion may not spark as much excitement among students as, say, a winning basketball team, but it probably should, say those who study endowments.

“We see that schools that have over a billion dollars in assets and in their endowments tend to spend a lot more money on financial aid for students and also tend to hire greater numbers of faculty and sponsor more faculty research,” said Ken Redd, an expert on college endowments at the National Association of College and University Business Officers.

“All those eventually benefit students directly or indirectly, so it’s really a good thing for any campus to be able to have those resources,” he said.

For research purposes, Redd’s organization groups universities into several tiers by endowment size, with those at $1 billion and above being the top level.

There are several advantages that universities gain when their endowments reach that tier, he said, including some things that can be summed up as the greater ability by rich institutions to get richer. There are economies of scale in managing the larger investments, and an ability to sink large sums in long-term – and potentially more lucrative – forms of investment that may not be available to those with fewer assets, he said.

And while students may not pay much attention to endowments, professional fundraisers and alumni do, Redd said. His organization’s research has found that schools use it as a badge of success when they solicit more donations.

“We’ve seen record interest in the numbers of applicants for admission; we have seen unsurpassed external research support like the (recent) $140 million Department of Energy grant,” Sischo said. “So I think folks see N.C. State being on an upward trajectory and that it is quickly being recognized across the state but also across the nation as a leading research institution.”

Also playing a role is the sheer transformative size of some major gifts in the past couple of years, Sischo said, and a growing understanding that the increasing cost of higher education means that students need more help with financial aid.

The result is the kind of major gifts that underwrite the university’s highest-profile scholarship programs, including the Goodnight and Park scholarships.

Aggressive fundraising

Several key measures of giving have hit records in the past few years. Before 2011, gifts and new commitments to the university had never exceeded $100 million in one year. They have every year since, and they reached nearly $203 million in fiscal 2013 and more than $187 million in fiscal 2014. The main push for all this came from Chancellor Randy Woodson, who arrived in 2010 vowing to sharply increase the size of the endowment, which lagged those of many of its national peers.

Woodson has not only pushed for aggressive fundraising but lives it, traveling the state to meet with alumni and even visiting groups of them as far away as Silicon Valley and even Asia.

“He is fond of saying that with state support we can be a good university, but it’s with private support that we can become a great one,” Sischo said. “That message has really resonated with folks and has really manifested itself in their willingness to support the university.”

UNC-Chapel Hill’s endowment hit about $2.6 billion this year and has been above the $2 billion mark for a few years now. It is nearly a century older, and traditionally has had a much larger and wealthier donor base. Duke’s endowment has reached $7 billion, and Wake’s topped $1 billion a few years ago.

That trio, unlike NCSU, has the advantage of each having a medical school, a major advantage in fundraising.

Also, Duke and Wake are private universities, which have long been focused more intently on fundraising than public ones. In part, this was because students at expensive private universities were more likely to come from families with more to give.

Necessity, though, has forced public universities around the country to push harder for donations in the past two decades or so, said William Jarvis, managing director of the nonprofit Commonfund Institute, who studies university investing.

“Once the states began to withdraw their support from these institutions that they had created and they were funding, then it became incumbent on the institutions and the alumni who were active to do something,” Jarvis said. “And they realized they weren’t going to be able to do much with the alumni who were already out there. They had that attitude, ‘I went to State, I paid, I’m done,’ so they started focusing on their entering undergraduates, working with them to create this spirit of gratitude and obligation that would lead to a habit of donation.”

One more reason NCSU is closing in on $1 billion is that it has begun to erase some of its disadvantages. For one thing, its enrollment grew quickly in the past few decades and is now larger than UNC-Chapel Hill’s.

Also, it has sharply increased its fundraising and efforts to cultivate alumni. The number of donors is up 34 percent since 2010. And membership in the alumni association has climbed 25 percent in four years.

Also, given that so much of its focus is on the so-called STEM fields – science, technology, engineering and math – it now has its own advantage: The rise of the tech economy means those disciplines are where many of the newest fortunes are being founded, said Mary Peloquin-Dodd, the university treasurer.

And big fortunes are, of course, where universities get the big donations.