"Set a small goal and earn it 100 million first! ”
As we all know, every year, a number of American universities, led by Ivy League schools, receive donations of tens of billions of dollars from alumni and celebrities, and this Versailles quotation of Wang Jianlin is a normal phenomenon for American universities.
Unlike China, American universities, especially the top private universities, rely mainly on these private funds to set up endowment associations to run their schools. Issuing scholarships, building buildings, and engaging in scientific research. The deep mansion compound and the large number of talents that everyone sees are inseparable from the support of donations.
Affected by the epidemic in the past two years, the surplus grain of the landlords' families has generally shrunk. John Princes University (JHU), for example, saw a net shrunk of 11 in FY225%, evaporating nearly $100 million.
However, according to last year's data, out of the epidemic, the vast majority of American universities have turned losses into profits, and JHU, which suffered the worst losses the year before last, directly started a turnaround battle last year, and the scale of donations increased by 278%, which has become the fastest growth rate among the top 20 universities in terms of capital scale.
American universities "win", how did they do it? What's the story behind it?
Where does the money come from and goes to **?
I want to know how the coffers of American universities are managedThe first thing to do is to figure out where their money comes from.
Generally speaking, in addition to the tuition, grants, and research funds contributed by our students, a large part of the income of American universities comes from "donations". For private universities in particular, donations are their primary source of income**.
Taking the 2023 financial report released by Harvard University as an example, 45% of its financial revenue comes from philanthropy, that is, donations, and 17% comes from scientific research** and private funding. The regular "education income", which consists of tuition fees and accommodation fees, actually accounts for only 22% after deducting scholarships.
Some people say that American universities are recruiting students to make a kind of investment, which is very reasonable from the perspective of donation.
The more potential students recruit, the more likely they are to become outstanding alumni who will be proud of your alma mater today and proud of your alma mater tomorrow in the future. The better the school has money, the easier it is to raise high donations. It's a virtuous cycle, and it's the reason why admissions not only look at academics, but also value students' qualities such as leadership and creativity.
And well-known entrepreneurs and institutions are also willing to invest money in these top universitiesThe first is to establish a good relationship with the school and cultivate reserve talents, and the second is to advertise yourself while reasonably avoiding taxes- Schools that usually receive large donations will ask donors to title the college or program they donate:
In 2015, Chandrika Tandon (who is also a trustee of New York University) and her husband donated $100 million to New York Institute of Technology (Polytechnic University, part of which was formerly known as the School of Engineering, which was spun off from New York University due to financial difficulties in the early years), and the School of Engineering has since been renamed Tandon School of Engineering.
In 2017, Madison founders Larry Gies and his wife donated 1$500 million, despite my low profile, UIUC still changed the name of the business school to GIES College of Business;
Donations are a very important part of American educational culture, and many students respond to the school's call to give back to their alma mater years after graduation. Although not everyone has donated hundreds of millions, the amount of money is quite considerable.
According to some data, the donation rate of alumni of elite American universities is as high as 30%-40%.
In 2023, Harvard's donation** scale has come closer$50 billionThe Texas state is also approaching $45 billion, and the top universities we are familiar with, such as Yale, Stanford, and MIT, have also stabilized at the 200.4 trillion mark.
Such a scale can fully obtain the annual GDP of many small countries, and this kind of wealth that rivals the wealth of other countries has also made American universities hire professional managers and teams to do a good job in annual fund management and investment operations, so the annual financial reports of each school have also attracted attention from all parties.
So the question is, after collecting so much money, where does it end up spent?
Or take Harvard's 2023 financial report as an example, the school spent a total of money during the year$5.9 billion, up 9% from last year and accounting for 11% of total donations**. Among them, the human cost composed of salaries and various remuneration still accounts for half (52%), and the school building, laboratory, logistics, and various expenses together account for the other half, after all, education is still people-oriented.
According to the statistical report, in fiscal year 2023, U.S. colleges and universities spent money from the endowment** pool$28.4 billion, $2.6 billion higher than the $25.8 billion in fiscal 2022.
The lion's share (48%) of this expenditure went to student financial aid, others included academic research (18%), endowments of staff positions (11%), operation and maintenance of campus facilities (7%), and other purposes (16%).
It is worth mentioning that the effective rate of disbursement of this money, that is, as a proportion of the total size of the endowment, is only 47%。If divided by type, the private university spending rate is 50%, compared to 4 for public universities1%。The expenditure rate with public universities** will be 42%。
This shows that although the scale of the donation is very large, the actual funds that each school takes out for expenses every year are less than 5%, and most of them continue to be "hidden".
Turning losses into profits and growing assets
As is customary, NACUBO* released data on U.S. college endowments** (2023) in the middle of this month, from:688American universities and their affiliated associations, which run from July 1, 2022 to June 30, 2023, are the concept of the fiscal year.
The 688 universities that participated in the survey managed a total of$839.1 billionThe donated assets amounted to RMB 6 trillion, which is just the same as the total investment in China's education in 2022. Compared to $817.3 billion in fiscal 2022, giving** grew slightly by 3% in fiscal 2023.
This is the largest scale of donationstop 20(to be clarified, the proportion of the figures in the chart below is not the rate of return on investment, but the rate of change in the size of the total endowment).
As you can see, except for Princeton, MIT, Northwestern, and Washington St. Louis, there has been a slight contraction, and the size of the funding of other schoolsIt is basically the same as last year, or even increased.
Especially JHULast year, it shrank by more than 10% and fell to the last place in the TOP20, but this year it has achieved a counterattack and the scale of funds has increased, which moved up five places in total to become the fastest-growing school.
Another interesting point is that if the donations of each university are averaged to each student, Princeton University, which has less people and more money, is worth more than $4 million per student, while a public university with a large number of people is only worth $60,000.
Of course, this number is of little significanceAfter all, how much money the school has and how much it is willing to spend on you are two different things.
From a structural point of view, due to various reasons such as history, fundraising scale, management capacity, etc., there is also an imbalance in the number of university endowments** in the United States, with the median size of university endowment** being 2$100 million, and nearly one-third of universities give $100 million or less.
In terms of the size of the funds,Universities continue the "Twenty-Eight Rule".- There are 138 schools with more than $1 billion, accounting for 20 percent of the total number of schools, but they have more wealth in their hands$500 billion, accounting for nearly 85%.
Asset allocation and investment returns
The return on investment is one of the hard indicators for institutional investors, and in fiscal year 2023, the return on investment of American universities and their ** will be, as reported in FY2022The rate of return has reversed sharply.
In fact,Due to the different capital scales of each school, the investment strategy and portfolio model are different, and the rate of return will also be quite different.
According to common sense, those with higher assets can hire more professional investment personnel, and the investment is more professional, and the rate of return should be higher, which is basically the case in previous years.
However, the situation in fiscal 2023 is quite the opposite. Universities with more than $5 billion in endowments have the lowest average rate of return only, and the lowest tier of universities with endowments of less than $50 million have a high average rate of return
Judging by the reasons, such as Kara D., the head of NacuboAccording to Freeman, the higher rate of return is largely due to the strength of the top technology stocks in the market. He notedHistorically, schools with larger endowments** have tended to perform better, in part because they have allocated more money in the private markets (private equity, venture capital, startups, middle market companies), but last year, none of these areas yielded as well as the public markets.
In contrast, smaller schools have a much larger allocation to publicly traded**, particularly in the U.S.**, which has the highest returns in FY2023.
But,In the long run, the larger the asset size and the more it is allocated in the private market, the higher the medium and long-term returnsThis is also in line with our basic understanding of the profit and "the rich are getting richer and richer".
Speaking of which, we have to mention the asset allocation of American university donations.
Asset allocation is often considered to be the main factor influencing investment returns, and this is evident in the field of university endowments**. Overall, the asset allocation of US universities is quite balanced, with private equity accounting for only about 17% of the total.
However, as we have just seen from the investment results, the asset allocation strategies vary greatly among different sizes of donations**.
Or toHarvard UniversityThe 2023 financial report, for example, has a large difference in asset allocation from the national average
Among the seven asset size types,:11% for public equity, 39% for private equity and 31% for hedged**Real estate accounted for 5%, bonds accounted for 6%, other physical assets accounted for 2, cash and others accounted for 5%, and natural resources (oil and gas extraction), which have been controversial in recent years, were cut to 1% in this **.
Therefore, from a rational point of view, the changes in the investment rate of return and asset scale of American universities are not only related to the macroeconomic situation, but also highly linked to the performance of different asset allocations.
The income and loss of these top schools we see is actually only the tip of the iceberg of their wealth, and their performance often does not represent the actual quality of school operations.
The ones who are really struggling with food and clothing are still those schools that are unknown and have no money to do any asset allocation.
Regarding the value of university endowments, Ted Mitchell, president of the U.S. Board of Education, has said that it can provide universities with an additional financial contingency that can be used to support the camp when other things don't go well, such as plummeting enrollment or a natural disaster. But in reality it is not difficult to find,The so-called "firewall" of donation** seems to have gradually developed into a familiar "capital monster". Since universities are not-for-profit organizations or entities, these often come with billions of dollars in tax breaks. With such a large amount of wealth, many universities have chosen to hire special people to make "money make money", and want to make the school "worry-free". Since it has become capital, it is inevitable to be mercenary. Universities have begun to get involved in hedging, real estate, bonds, and bonds, and have often been controversial over investments such as Harvard University's investment in private prisons and oil extraction, while California and Texas State have been investing in land for many years without spending much money on teaching facilities. Partial behavior,This is undoubtedly contradictory to the values of American universities that emphasize the development of global citizens and future leaders. This is part of the reason why we have seen student organizations in recent years, and the generally negative attitude of American society towards giant universities. What is more closely related to each student is that while the donation is getting bigger and bigger, the tuition fees of each school are still skyrocketing every yearWhy can't we use more donations** to reduce tuition fees and give more scholarships to everyone? In the face of this problem, universities always look like they are crying poor and selling miserably, and they give bureaucratic answers with both hands:"It's being done, it's being done, it's hard for us! ”