Four institutions lead the race for crucial endowment assets
FOR almost 100 years, the endowments of historically Black colleges were small-time affairs, consisting of a few thousand dollars conservatively deposited in savings bonds and other safe investments. But a booming stock market and a new wave of financially savvy college presidents and business officers have changed all that. As a result, the endowments of an elite group of Black colleges have skyrocketed, with three institutions--Howard, Spelman and Hampton--reporting endowments that top $100 million, and at least one other institution approaching that mark.(*)
With an endowment of $215.5 million, Howard University is the richest Black university, but it has been funded in part by the federal government. Spelman College is the richest traditional college with $156 million. Hampton University comes in third with $140 million. Morehouse College closes out the top four with $78.8 million. A second tier of Black colleges, led by Dillard University and Tuskegee University, is in the $40 million range.
In evaluating these figures, it must be remembered that the endowment is not an absolute measure of a college's economic success and that it must be considered along with other criteria, including the institution's debt load, financial management and enrollment. If we factor in the enrollment, as most financial rating agencies do, Spelman emerges as the richest historically Black institution, with an endowment of $82,148 per student, followed by Morehouse College, with $28,530 per student.
Another critical point here is that the word richest is a relative term, especially when you consider the $8.8 billion endowment of Harvard University and he $5.7 billion endowment of the University of Texas. From this standpoint, then, and from other standpoints, even "rich" Black colleges have a long way to go before achieving financial parity with White institutions.
For these and other reasons, all presidents interviewed said the fact that they have relatively large endowments does not mean that they need less money--it means, they say, that they need more money to maintain their competitive position and to ensure continued excellence in education.
Dr. Walter E. Massey, the distinguished scientist who heads Morehouse College, says "We are far from rich in terms of our needs and in comparison with the top White liberal arts colleges. We need more, not less, support from traditional money markets and from all Blacks, especially our graduates. We are preparing a major capital campaign to address these needs and to increase our endowment."
After the top four Black colleges and the second tier of institutions in the $40 million to $20 million range, the endowments of most Black colleges drop sharply into the low teens and the single-digit millions. This means, among other things, experts say, that Black colleges are divided into a handful of "haves" and a vast number of "have-nots." Thus, Black colleges are at a crossroad, with experts predicting that only Black colleges with substantial endowments will survive.
"There are forces that don't want to see Black colleges continue," says Dr. William R. Harvey, president of Hampton University. "Endowments bring about that long-term security that no one can take away from you. I honestly think that without that security, in 20 years some of us won't survive."
UNCF President Dr. William H. Gray III, Spelman President Audrey Forbes Manley and other educational leaders stress the critical importance of the endowment. Dr. Massey says, "Given the kinds of things we have to support at our institutions, one of which is financial aid to meet the cultural needs of our students, a substantial endowment will be the key to the survival of Black colleges in the next century."
Endowments are reserves of corporate and private donations universities invest to make money. Generally, schools keep the principal intact, spending only the interest, which can be used to fund anything from special chairs for faculty to student scholarships to capital improvements.
When Dr. Harvey became president in 1978, Hampton had just $29 million in its endowment fund. Dr. Harvey, a successful businessman who is 100 percent owner of a Pepsi-Cola franchise, rolled up his sleeves and went to work, seeking donations from corporate executives and alumni and encouraging smart investments like a shopping center near the campus that nets about $1 million profit each year for student scholarships.
Almost 20 years later, Harvey is one of a handful of Black college executives riding the wave of financial success.
H. Patrick Swygert of Howard says building an endowment takes good investment managers, alumni support and a little luck. When the stock market performs well, everyone reaps some of the bounty, he says. But college presidents must walk a tight rope between limiting financial risk and trying to get big returns with their investments.
Dr. Harvey recalls with regret the 1987 stock market crash. Hampton lost $10 million of its then $75 million endowment, he says.
"It was traumatic," Dr. Harvey says. "Not many of us can afford to lose it. I didn't like that we lost it, but we built it back up."
Although Hampton, Spelman and other institutions have traditionally received contributions from White philanthropists and donors, the major impetus behind the recent growth in their endowments seems to be due, in large part, to changes in the stock market and creative leadership by presidents like Spelman's former president, Dr. Johnnetta B. Cole, who received major gifts from Bill and Camille Cosby, and a new generation of financial officers and trustees with new game plans. Spelman's new president, former Acting Surgeon General Audrey Forbes Manley, praises the college's vice president for business and financial affairs, Robert Flanigan Jr.
"We have never had any financial mismanagement," she says. "Some schools have not been so fortunate. [Our people] have managed our financial portfolio with great skill."
There its another reason for the trig change. Until recently, UNCF President William H. Gray III said, Blacks were effectively locked out of the possibility of developing a wealthy class. "That's changing," he says, "and we are beginning to get an emerging superich class--by that I don't mean a million dollars in assets, I mean over $50 million--in entertainment and sports but also in business. As a result, we are beginning to see top Blacks give significant money to their schools."
Dr. Manley, the first alumna to serve as president of Spelman, says increased giving by graduates played a major role in the success of the school's last campaign. "We had many large, even six-figure gifts," the Spelman president says. "The success of our campaign clearly dispels the notion that Blacks don't give to African-American schools."
The challenge here and elsewhere is whether smaller Black colleges with little or no endowment can get into the game before the game--which has effectively locked them out--makes it impossible to play the game without substantial endowments.
A key to getting good returns with reduced risk is maintaining a diverse investment policy, says Peggy Woodford Forbes, founder of Woodford Gayed Management Inc. "It is better to have several different kinds of investments," she says. "So if some underperform, you have the probability that others will overperforms."
In addition to the shopping mall, Hampton has invested in bonds, real estate and emerging markets such as South Africa and Poland. Among Howard's investments are mid-to large-growth companies, Woodford Forbes says.
Five minority firms--including Woodford Gayed--manage Howard's $215.5 million endowment. "It' s not just building the endowment, but who is managing the endowment," says Swygert of why he chose Black-owned consulting firms.
Dr. Massey of Morehouse also praises the performance of minority money managers. "A substantial portion of our endowment," he says, "is managed by minority financial institutions." Like other presidents, he praises the performance of the college's money management team and adds that men trained at Morehouse played a major role in the recent increase in the endowment.
Harvey says building an endowment takes something even more fundamental--old-fashioned discipline. At graduation time each year, he tells seniors to get into the habit of saving. He offers the same advice to college presidents who ask him how to increase their endowment. "Some say, `I am struggling so much I can't even make my current bills,'" he says. "But no matter how small, they have to construct a fund-raising program and put some money in the bank."
Swygert says even Black institutions like Howard University still need help. "Some folks may say, `Howard's OK. We don't have to help them,'" he says. "But context is important. Again, it's $200 million for Howard and $5 billion for Yale."
Dr. Manley says building endowments is a perpetual task. There's never a comfort zone where you stop campaigning for money, even with the financial gains Spelman has made in recent years. "We start from a position of strength," Dr. Manley says. "But that doesn't mean we don't have things to do."
Dr. Manley and other presidents say more Black people need to get into the giving act. As more Blacks enter the middle class, they say, more money should flow into Black schools.
Students at Howard are taking that message to heart. Last year's student body president started a dollars-for-scholars campaign and invited every student to give one dollar toward the endowment. Giving back to Black colleges is a philosophy Swygert follows himself. The Howard alumnus donates all fees from his speaking engagements to a fund for emergency student loans he established in memory of his parents.
If Black colleges are to survive, he says, administrators must instill in students that they owe something. In a sense, these students and alumni hold the future of Black colleges in their hands.
"Thousands of graduates are reaching a point where they can give something back," he says. "They need to know it's time." He pauses and adds: "It's past time."
(*) The endowment figures listed in this article for the top Black colleges were received from the schools. Independent sources confirmed the relative rankings of the schools but reported slightly lower figures based on 1996 evaluations.
RELATED ARTICLE: Richest Black Colleges
INSTITUTION FOUNDED ENDOWMENT(*) ENROLLMENT(**) PER STUDENT Howard 1867 $215.5 million 11,265 $19,130 University Spelman 1881 $156 million 1,899 $82,148 College Hampton 1868 $140 million 5,700 $24,561 University Morehouse 1867 $78.8 million 2,762 $28,530 College
(*) Endowment as reported by schools, August 1997 In the authoritative 1997 report of the National Association of College and University Business Officers (NACUBO), based on 1996 market value of endowment assets, Howard ($176,186,000) ranked 131 out of the top 466 institutions. Spelman ($140,692,000) ranked 162, and Hampton ($113,046,000) ranked 190.
(**) Enrollment figures from 1996-97 school year
RELATED ARTICLE: The Top Twelve
The 12 top historically Black institutions, based on 1996 market value of endowment assets, are Howard University, Spelman College, Hampton University, Morehouse College, Tuskegee University, Dillard University, Clark Atlanta University, Xavier University, Stillman College, St. Augustine's College and Bethune-Cookman College.
The 12 institutions had a combined endowment of $717.2 million, about 8.9 percent of the $8.8 billion endowment of Harvard University, the richest White university. The smallest endowment reported by a historically Black institution was $1.7 million.
SOURCES: NACUBO, Howard University Research, United Negro College Fund.…