The College’s endowment actually rose last quarter – despite disappointing returns in the U.S. stock market – from $467 million in September to $481 million at the year’s end. In terms of investment performance (with gifts excluded) Oberlin’s portfolio climbed 4 percent.
While this is welcome news for administrators, it is a meager return compared to the boom of the late ‘90s, when the endowment once climbed 28 percent in a single year. And the 4 percent increase hardly keeps pace with regular spending demands that will drain about 6 percent from the endowment this year – meaning that continued scant growth could pull the College’s pursestrings tight again.
In a recent interview, Vice President for Finance Andy Evans seemed upbeat, if somewhat concerned, about the future of the College’s sizable endowment. Some financial doomsayers, he said, have presaged another bad year for the domestic economy, to which the endowment is inextricably tied.
“As January goes, so goes the rest of the year,” Evans recounted. January’s endowment returns, while not yet fully compiled, he called “gloomy.”
But with spending curtailed, and a wave of job cuts already in place, the College seems to be out of the woods for now.
“We’ve already shrunk our spending needs,” he said.
Still, Evans notes that economic growth is uncertain. A recent report found that the U.S. economy grew by a tiny 0.7 percent in the last quarter, and hiring at businesses is at a 20-year low. Many corporations have cut back on expansion, unsure of what potential war with Iraq may bring.
Like any other business, Oberlin is also worried about the ill effects of war. College President Nancy Dye says that suspects there will be deleterious effects resulting from any Iraq conflict.
“The impending war with Iraq not only makes things more difficult to predict, but if we indeed have a war it will harm the markets and the economy more,” Dye said.
Evans too said he’s nervous about the effect of the war on the College’s endowment. But he’s confident that the College will weather whatever scenario emerges.
“We’re going to hold spending, we’re going to encourage fundraising and we’re going to be extraordinarily careful about overextending ourselves,” he said.
He added that students will probably not feel the effects of the College’s slightly more Spartan lifestyle.
“I don’t think students will perceive much difference,” he said.
Dye asserted that despite the budget cuts, she believes that the College has benefited from the challenge of streamlining the budget.
“In some ways, it is good to have some experiences like this,” she said, “because then you get yourself trimmed if you will so when the market goes up you don’t have a problem, you’re where you should be in terms of financial equilibrium.”
A study conducted by the National Association of College and University Business Officers released two weeks ago found that endowment performance at American colleges and universities had reached the lowest levels since fiscal year 1974, when the U.S. witnessed an economic crisis brought on by a sharp rise in oil prices.
On average, colleges lost 6 percent in fiscal year 2002. Oberlin lost much less, at 2.9 percent.