Hopkins's endowment drops amid recession

Hopkins endowment returns, which dropped for the 2008 fiscal year, were consistent with losses experienced by peer institutions, according to Dennis O'Shea, spokesman for the university.

Hopkins's endowment totaled $2.3 billion and ranked 24 on a list of endowment sizes for American universities in 2006. It has since dropped $0.2 billion, according to O'Shea.

On average, universities have reported 10 to 20 percent losses by the end of the 2008 fiscal year, explained O'Shea.

"The University's investment performance for the first six months of fiscal year 2009 [July 1 to Dec. 31, 2008] was about minus 20 percent," O'Shea said. "At the end of that period, on Dec. 31, the endowment stood at about $2.1 billion."

But the decline in investment returns did not include the value of the endowment itself, according to O'Shea.

"That [loss] is investment performance only; that does not mean that the endowment's total market value declined by 20 percent during that period," he said.

O'Shea declined to speak more specifically about the type of investments the Hopkins endowment had.

"It is possible for large pools of money, like a university endowment, to be more diversified than your investments or mine," he said.

As demonstrated by Harvard's high-profile announcement that it lost $8 billion dollars - about 20 percent of a previously $37 billion endowment - due to the credit crunch and ensuing economic downturn, universities across the country are facing comparable significant endowment return losses.

Part of the reason Hopkins has avoided such a massive loss, according to O'Shea, is because the Hopkins fixed income portfolio contains no credit exposure, avoiding the hard-hit mortgage-backed securities.

Overall trends in American universities point to drops in endowment investment returns as a result of falling stocks and investments, and have forced schools to cut back on spending, or in some cases, to cut back on financial aid grants to admitted and enrolled students.

Even the most cautious universities have suffered - as the value of assets and investments have fallen, schools are left with few places to turn.

"With all that's going on in the economy it's not just the endowment we need to worry about. In this economic environment, people are less likely, and less able to donate money,"said Frederick Puddester, Senior Associate Dean for Finance and Administration of the Krieger School at Hopkins.

"We will need to be even more sensitive than ever to the possibility that the financial circumstances of our students and their families will change during the course of their time at Hopkins, putting more pressure on our financial aid budget," O'Shea said.

Universities are reporting a range of fiscal losses. Those with cautious trustees and low-risk investments are weathering the storm, while those who recently expanded buildings or financial aid are feeling the squeeze a bit more, as noted by a recent report in the New York Times.

Schools that invested in sub-prime mortgage packages or other alternative types of investments are struggling the most.

Hopkins is committed to certain projects already - the renovations of Gilman Hall, for instance - but is working to halt further capital projects in an effort to save money.

"Some schools have delayed faculty or staff searches, frozen budgets or postponed renovation projects," O'Shea said.

"Hopkins is concerned about a number of its revenue sources," O'Shea said, pointing out that Maryland's state aide to independent higher education has already been cut this year and the state's budget will be very tight again in fiscal 2010.

According to O'Shea, reimbursement for Hopkins's research overhead costs is tight.

"Federal research dollars have been tight, and the future of research funding is unclear," he said. "And while, obviously, our University alumni and friends have been loyal, committed and very generous, the immediate future of philanthropic support is uncertain, not only for us but for everyone."

O'Shea and Puddester both explained that the University is in a period of analyzing loss and planning for the future, but that many decisions have not yet been made.

"We have tightened our belts and managed these challenges for fiscal 2009, which ends June 30," O'Shea said. "This happened school-by-school; it did not involve across-the-board actions applying to the entire University."

Hopkins is working closely on saving money not only for the present, but for the months or even years of recession to come.

"After we had fiscal 2009 dealt with, we turned to planning for the even more challenging times expected over the next two fiscal years, beginning on July 1, 2009," O'Shea said.

"We're budgeting for more than $100 million in reduced revenue University-wide in each of those two years."

Hopkins students have been feeling the brunt of this, with funding cut to student groups, intramural sports and other activities that students feel contributes to the undergraduate experience at Hopkins.

According to O'Shea, Hopkins is not suffering as much as expected in the context of the current financial crisis.

O'Shea said of Hopkins's losses, "[A loss of 20 percent] is negative, but it's actually a pretty good performance, considering the markets ... I wish my personal investments had done as well!"