Wall Street blues: Christian universities tout long-term approach
Abilene Christian, Lipscomb and Pepperdine are among Christian universities assessing their endowment portfolios in light of the nation’s financial crisis.
But financial officers stressed that universities take a long-term approach to investing.
“Panic selling during a down market is a quick way to lock in losses,” said Brian Starr, an economics teacher and administrator at Lubbock Christian University in Texas. “But more importantly, we try to use times like these to remember that we ultimately do not rely on the gifts in our hand but on God who put them there. And we are confident that he will see us through.”
The good news, said Dave Clouse, vice president for advancement at Freed-Hardeman University in Henderson, Tenn., is that even in economic downturns, giving to charity usually increases.
“It increases by a smaller amount, but an increase nonetheless,” Clouse said. “Just as we use a 100-year time horizon with our endowment investments, I think that our benefactors … are with us for the long haul. When people recognize the eternal ramifications of Christian education, they give.”
An endowment is a grouping of funds whose earnings are used to support various institutional activities.
While an endowment typically is comprised of various investments, it could be considered like a savings account where a portion of the interest earnings is spent each year and a portion is retained so that it can grow.
But growth is the opposite of what has happened to endowments recently.
Lipscomb’s endowment, for example, stood at $78 million on May 31. Since, its market value has decreased by about 15 to 20 percent, said Larry Cochran, associate vice president for finance and endowment.
“This has been caused by general market conditions since there was no direct exposure in the endowment to the failure of troubled financial institutions,” Cochran said.
Among universities associated with Churches of Christ, endowment amounts range from a few million dollars to $115 million at Harding University in Searcy, Ark., $280 million at Abilene Christian and $760 million at Pepperdine, according to figures provided by financial officers.
“Obviously, we’re going through a period here where it’s very challenging in terms of the endowment and the returns, which are negative,” said Jeff Pippin, Pepperdine’s chief investment officer.
But unlike a personal retirement plan, an endowment is based on a “perpetual time horizon,” Pippin said. As a result, a university can afford to “ride through the kinds of periods where markets underperform.”
Jack Rich, ACU’s chief investment officer, said: “Our portfolio is highly diversified, and that tends to dampen the short-term volatility of the markets. That does not mean we have not seen declines … but the declines are well below what has taken place in the public markets.”
At Harding, Mel Samson, vice president for finance, voiced confidence in the diversification of the university’s investments and the expertise of its finance and investment committee. But he said, “We are very concerned about the crisis and monitoring developments closely.”
In some cases, such as with Freed-Hardeman and York College in Nebraska, reduced endowment earnings could mean less money available for scholarships this fall, officials said.
Echoing his counterparts, York President Wayne Baker said, “This is not the time to panic or make major changes to our balanced investment approach. We believe that having the right balance of funds will help minimize the risk and yet provide a way to be a part of the growth that will come as the crisis settles down.”