Top 10 Richest Colleges for 2011: The Biggest Endowments

Editor's Note: These rankings were based on information from NACUBO that was updated after it was published. For the final rankings check NACUBO's updated 2011 rankings.

That this list of the richest colleges is dominated by Ivy League schools is no great surprise. And it's no shock that Harvard is, well, the Harvard of endowments with a fund of $32 billion that nearly doubles the second school on the list. As advisors know, college endowments are often leaders, like many institutions, when it comes to investing strategies, particularly since they have such long investing horizons. That doesn't mean they don't face short-term challenges, however.

All of the schools had to deal with the financial meltdown in 2008 that caused huge losses in fiscal year 2009, but all of them have bounced back strongly. Besides investments, the endowments also rely on donations from well-heeled alumni.

All schools on the list have fiscal years that end in June, and they release those results soon after, except Emory, which routinely delays reporting till January. Therefore, Emory's results on this list are through June 2010 and not 2011. Here then are the Top 10 Richest Colleges with the percentage gain in the value of their endowment over the fiscal year in 2010.

10. Emory:
$5 Billion, up 8.5%
(as of end of fiscal year June 2010)

Remember the old Coca-Cola ad campaign about teaching the world to sing? Well, Asa Candler, one of Coke's founders, just wanted to help teach the world. To that end, he donated $1 million and 75 acres of Atlanta property to start a university. Emory was the name chosen and its reputation has grown through the nearly 100 years since Candler made his gift.

Mary Cahill, vice president of investments and chief investment officer, leads the Emory Investment Management team. Using expertise gained at Merck and Xerox, among other places, she has helped the endowment fund grow by 8.5% in the last year it reported. Judging by the monster years other endowments have reported since, it might be safe to assume that Emory will move up on this list.

9. University of Chicago:
$6.3 billion, up 18.8%

The University of Chicago is an esteemed institution with a proud history. Founded by John D. Rockefeller who wanted to do more than just give money to a college (he had no alma mater), the school was the site of the first nuclear chain reaction.

Led by Prakhar Bansai, Elisabeth F. Roth, Andrew James and David Warn, the endowment fund has cracked the Top 10 in U.S. colleges. Bansai came from Morningstar; Roth had worked at BMO Capital Markets and Merrill Lynch; James held several positions for Allstate Insurance; and David Warn worked for Morgan Stanley in London. The team maintains a diversified portfolio with the largest segments being in the absolute return and private equity categories.

8. University of Pennsylvania:
$6.58 Billion, up 19%

The Ivy League has a strong presence in the Top 10 and, like all the others on the list, it has bounced back from the market plunge of the Great Recession to post solid gains.

Kristin Gilbertson, who came from Stanford's endowment fund and has been Penn's chief investment officer since 2004, told the school's newspaper, The Daily Pennsylvania, that the endowment fund has diversified its strategy in recent years, moving away from a heavy reliance on stocks and adding private equity investments and real estate to the mix.

7. Notre Dame: $7.3 Billion, up 21.5%

Notre Dame is famous for its football team, a national power since the 1920s. Although the team might be going through a rough period, the school's endowment fund is upholding the school's tradition by being ranked in the Top 10.

Led by Notre Dame grad Scott Malpass, the fund not only invests well, but follows Catholic precepts when doing so.

"We comply with the bishops' guidelines on investing, so we have some restrictions based on Catholic social teaching," Malpass, who worked at Irving Trust Co. on Wall Street before returning to South Bend, is quoted as saying on the university's website. For example, Notre Dame's investment managers would not work with companies involved in stem cell research, contraceptives or pornography.

6. Columbia:
$7.8 Billion, up 23.6%

Columbia might not have a football team worth bragging about like Notre Dame's, but it does have a slightly bigger endowment fund. The Columbia Investment Management Co. was formed in 2002 with N.P. Narvekar moving from the University of Pennsylvania to be its president and CEO. Peter Holland is chief investment officer of Columbia's fund.

Like other college endowments, Columbia's has bounced back from drastic losses in the 2008 stock market crash. The school does not divulge its specific investments.

5. MIT:
$9.9 Billion, up 17.9%

Led by Seth Alexander, president of the MIT Investment Co., the fund has grown by 67% from the $6 billion it was worth in 2006 when Alexander moved over from Yale. The fund portfolio's primary focus is on equities. Over the last five years the annualized return has been 6.3%, boosting the endowment of the Massachusetts Institute of Technology.

4. Stanford:
$16.5 Billion, up 19.5%

The Stanford Management Co., founded in 1991, has also rebounded strongly from the depths of the Great Recession. Returns have grown at an annualized rate of 6.9% over the last 10 years, a period that includes a 25.9% loss in a single year, 2008.

The school's investments are directed by John F. Powers, president and CEO, who holds an MBA from the Stanford Graduate School for Business and previously worked for Offit Hall Capital.

3. Princeton:
$17.1 Billion, up 21.9%

Princeton's athletic teams are nicknamed the Tigers, and its endowment fund has lived up to the image: it's strong, tenacious and wasn't about to let a stock market crash kill it. The Princeton University Investment Co. has been led by its president, Andrew K. Golden, since 1995.

Golden previously helped direct the endowments at Duke and Yale, and he's a proponent of the David Swensen strategy devised by Yale's investment chief. The strategy, which calls for heavy investing in alternative investments like real estate, private equity and timber, came under fire during the Great Recession, but it looks like it worked out just fine. When Golden joined the Princeton fund it was worth $4 billion, and it has since shot up to $17.1 billion.

2. Yale:
$19 Billion, up 21.9%

It's a bitter pill for Yale to swallow. Maybe like Avis, the Elis tell themselves that they might be No. 2, but they try harder. Ivy League stalwarts, though, can take solace in the fact that David Swensen, its chief investment officer, is the father of an influential endowment investment strategy that bears his name (see Princeton).

While controversial with its mix of more alternatives and less liquid investments, the idea has caught on with other schools looking for ways to maximize the growth of their funds.

1. Harvard:
$32 billion, up 21.4%

Harvard continues its impressive run as the largest college endowment fund in the nation. Over the last two decades it has grown by an average of 12.9%, a figure that seems downright puny compared to the rise in the last fiscal year.

Led by its president and CEO, Jane Mendillo, who came from Wellesley's fund in 2008 (and happens to be a Yale undergrad and MBA), the fund has retooled its strategy with an emphasis on liquidity. (A fellow by the name of Mohammed El-Erian used to run the Harvard Management Company.) With the new strategy, the fund is climbing its way back to its record high of $36.9 billion reached before the Great Recession.

(Photos on Pages 1, 2, 4, 5, 9, 10: AP)

——————-

Top 10 lists from AdvisorOne: