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[Chris George/The Daily Pennsylvanian]

The past few years have not been easy on higher education's pocketbook.

With the exceptions of Emory University and Penn -- whose endowments grew 5.5 percent and .3 percent larger, respectively, between June 2001 and June 2002 -- the American universities with the fifteen largest endowments in the nation posted losses last year, according to the Chronicle of Higher Education.

The growth of Penn's total endowment, recently reported to have hit $3.5 billion, is largely due to shrewd investing, according to University Treasurer and Vice President for Finance Craig Carnaroli.

"As we reported to the trustees last week, Penn's endowment will be up 4.7 percent for the fiscal year ending June 2003, so we're pleased that we continue to make good progress on our diversification strategies," he said.

According to Carnaroli, just over one-tenth of the growth is due to domestic equities.

The remainder of the growth "came from the alternative strategies," Carnaroli said, citing high yield, hedge funds and buy-out options that perform well even in volatile markets.

"The important thing was that in 2000, when we were disappointed with the results, that we didn't overreact, that we stayed the course," Carnaroli said. "The key thing we've done [has been to] take advantage of market anomalies, which... partly explain our success in high yield."

Not everyone is so shrewd, however.

As figures for the fiscal year ending June 2003 become available, endowment strength remains mixed across the Ivy League, with some waxing and some waning.

Princeton University -- whose endowment was the fourth-largest in the nation in 2002 -- posted another year of losses, coming in at "$7.9 billion, with a 'b'" for the period ending March 2003, according to spokesman Eric Quinones. Princeton's endowment was 5 percent larger in 2002, totaling $8.3 billion -- then down half a percentage point from $8.35 billion in 2001.

Brown University, meanwhile, added to its endowment after losing around $20 million between 2001 and 2002 -- a loss that represented 1.4 percent of its endowment at the time. At $1.484 billion as of June 2003, Brown recorded a 3.3 percent gain.

Overall, few institutions have money to burn.

"I can indicate that all schools with which I have contact are seeking effective strategies for cost-cutting in the face of what, for most, has been a sustained period of lower endowment earnings performance," said Kristine Dillon, president of the Consortium on Financing Higher Education.

"That is not to say that selective, independent schools cannot sustain their priorities," she continued. "It does, however, mean that for most, efficiencies must be found in order to support the educational priorities adopted in recent years."

The crunch is especially tight at state universities, according to Barry Toiv, spokesman for the Association of American Universities.

"The big problem from state schools is the budget crunch, which has led many states to substantially cut the funding available for public higher education, so the public schools are facing real serious issues," Toiv said. "You mention Penn's endowment -- not everybody is so lucky."

All the numbers aren't as bad as they look, according to Louis Morrell, vice president for investments and treasurer of Wake Forest University.

"The market's back on the mend," he said. "We had a tremendous, long bull market running from '82 to 2000, then it fell off a couple years... [now] I think the bear market's behind us."

Morrell, who also serves on the advisory board of the National Association of College and University Business Officers, said that figures routinely reported in the Chronicle -- which illustrate an overall decline in endowment strength across the country during the 2002 fiscal year -- may be misleading, as losses often represent more than stock and bond choices.

According to Morrell, "If you looked at our beginning and ending market values, you'd assume that that was market loss. We took money out to cover deferred maintenance, handicapped access, lead paint removal -- if you look at the Chronicle, you'd assume we'd just lost it."

At Wake Forest, for example, the endowment grew from $420 million in 1995 to $969 million at the height of the stock market boom in 2000. Catapulted into U.S. News and World Report's top 25, the university thought strategically, Morrell said.

Wake Forest used its newfound funds for a wide variety of improvements, from new computer hardware to dozens of faculty hires -- and as the university improved, so did its applicants' ability to pay the cost of higher education.

With more "pricing power," Wake Forest could charge more.

"The bottom line simply is, the thing that drives private higher education financially is... tuition net of scholarships and financial aid," Morrell said. "That's where the money is."

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