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Endowment Yields 19.2%; Rises to $4.5B

The endowment has risen from $3.73 billion to $4.50 billion as the College announced that its investments yielded a 19.2% return. That’s the best performance since the blowout at the top of the bubble in 2000, when the endowment rose by a mind-numbing 46%. (As a cautionary tale, it fell by 3%, 6% and 3% over the next three years, and the administration was forced to make painful budget cuts). The College’s calculation is as follows:

The increase reflected net investment gains of $778 million and new gifts and transfers of $146 million, offset by distributions of $189 million to support Dartmouth programs.

By way of background, the draw from the endowment to support the College’s operations each year is about 5% of the total value of the endowment (based on a rolling three-year average).

The real question here is, “Hey Phil, what you gonna do about it?” A jump in the endowment of $735 million will allow the endowment to throw off an extra $36.8 million in a couple of years (recall the 5% draw figure mentioned above). Where will the money go? If past practice is followed, the ever-growing, overpaid staff will get most of it. One might expect that this is how things will go this time around, too — after all, most faculty members received a raise of only 1.5% this summer, with some getting a meager performance raise on top of that figure.

I’d suggest that right now Phil announce that he is allocating a good chunk of this money to reducing tuition. The 2.9% increase for this year was twice the rate of increase in the Consumer Price Index, even though Phil had promised increases in line with inflation. He justified that commitment on the basis that investment returns would probably be moderate in the coming years. How happy he must be to have been wrong. In 2013, the College took in about $120 million in undergrad tuition (not including room/board and fees). Using part of the new $36.8 million could make a big dent in that figure.

If Phil is the bold President that I hope him to be, he could announce right now that next year we will match Princeton for the lowest cost of education in the Ivies: $55,440/year. Dropping from the current $61,947 to that level would cost us something in the range of $16-$18 million dollars, not even half of the new budget money made available by the endowment’s wonderful return. And Phil could set a further goal of reducing that figure even more in the future, if endowment returns allow it. His three-year goal could be to make Dartmouth the most affordable school in the Ivies. Long live, Phil!

Addendum: Beyond the intrinsic nobility of such an ambition, a bold statement by Phil would get us on the front pages of national newspapers for something other than rape, binge drinking, hazing and racism. Wouldn’t that be a nice change?

Addendum: While the College is thinking of how to spend this extra money, an allocation to revamping dorms would go a long way to improving residential life at the College, as Lorelei Yang wrote in The D today, and as this space has noted, too.

Addendum: None of the other Ivies have reported their results to date.


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