Bowdoin’s endowment exceeded $1 billion in fiscal year (FY) 2013 for the first time, according to a report published Wednesday on the Bowdoin Daily Sun. The endowment was valued at $1.038 billion on June 30, up from $902.4 million at the close of FY 2012.
The College’s investment committee—led by Senior Vice President for Investments Paula Volent—generated a return of 16 percent on the endowment in FY 2013. This rate surpasses the overall mean return for all college and university endowments of 11.6 percent this year, and is in the top 5 percent of peer returns according to Cambridge Associates, a firm that tracks educational funds’ performance across the nation.
“Into the future, to the extent we want to stay a stable institution that is affordable to the middle class, it’s all about the endowment growth,” said President Barry Mills. “What is an endowment for? It’s money that is there in good times and in bad times to support the program of the College.”
The endowment portfolio consists of over 1,600 individual funds in a variety of asset classes—including equities, fixed income, real estate and absolute return strategies—and is invested to ensure both stability and long-term growth according to the economic climate.
The three-, five-, and 10-year annualized returns for the College’s endowment as of FY 2013 are 13.3 percent, 5.9 percent and 10.3 percent, respectively, according to the Bowdoin Daily Sun.
While the endowment’s strong performance is indicative of Bowdoin’s financial strength, it’s not a blank check for new programming, development, or reductions in tuition costs.
“Yes, a great return helps, but it’s not the whole picture,” said Senior Vice President for Finance and Administration and Treasurer Katy Longley.
Income from the endowment each year accounts for approximately 30 percent of the College’s operating costs. Funding for the lion’s share of each year’s costs—about 50 percent—comes directly from tuition and fees.
“We can’t really control increases in tuition and fees unless we control costs overall,” said Longley.
Bowdoin’s tuition and fees have continued to rise—the comprehensive fee is approaching $60,000—but increases in the past few years have been kept to a minimum, largely thanks to the endowment’s strong returns.
Both the 2011-2012 and the 2012-2013 academic years saw the comprehensive fee increase by just 3 percent—a lower rate than most of Bowdoin’s NESCAC and Ivy League peers, and the smallest annual percentage increase in Bowdoin’s “list price” since 1971.
The proposed operating budget for FY 2013-2014 includes another 3 percent increase, bringing the comprehensive fee to $57,834. Documents provided by the Treasurer’s Office show these numbers will be just under the mean increase and fees at Bowdoin’s peer schools.
Mills has stressed the importance of ensuring the affordability of a Bowdoin education in recent publications and speeches. In May’s Baccalaureate Address, he noted that at least 46 percent of the Class of 2017 receives some form of financial aid, with an average grant of approximately $36,000.
In response to the rising costs of higher education nationwide, President Obama recently unveiled his college affordability plan. The centerpiece of Obama’s plan—outlined in a speech on August 22 at the University at Buffalo—is the development of a new college ranking system that he intends to tie to the allocation of federal student aid.
Under the President’s plan, lower income students who attend higher-ranked colleges and universities would receive larger Pell Grants, for example, because colleges would be awarded incentives for enrolling and graduating Pell Grant recipients.
Rankings of colleges would be based on factors such as affordability, graduation rates, unemployment rates and the percentage of students graduating with manageable debt.
At Bowdoin, federal aid awarded to students through need-based scholarships and grants totaled $1.61 million in the 2012-2013 academic year, and 16 percent of students received Pell Grants, according to the College’s Common Data Set. The principal source of federal funding Bowdoin receives is through grants for research, which are “not huge amounts, but very important for the opportunities our students get in laboratories,” according to Mills.
The Obama administration has yet to give more specific details on how this ranking system would work, so it’s unclear how the plan would affect Bowdoin as of yet.
“We share his goal of making college affordable and accessible, but as far as the details and its impact on Bowdoin, it’s too early to tell,” said Longley.
In his Convocation Address on September 4, Mills noted that many college leaders approve of Obama’s focus on affordability but “worry about a ‘one-size-fits-all’ ranking system.”
The College’s comprehensive fee will continue to increase in the meantime, as new technology, buildings, and programs all contribute to the rising cost of a Bowdoin education—the comprehensive fee has increased by 239 percent since 1994.
“Fifteen years ago, there was no technology at Bowdoin. Twenty years ago nobody came to campus with computers. Today, we have to spend between seven and ten million dollars every ten years in order to upgrade our network. There are costs associated with operating our college that didn’t exist ten or fifteen years ago,” explained Mills.
While innovation and infrastructure contribute to the rising cost of a Bowdoin education, both Mills and Longley agreed that the primary expense at the College today is people.
“People; payroll and benefits, account for about 62 percent of the College’s costs,” said Longley.
“The cost of our program has risen faster than inflation because so much of our cost is linked to parts of our economy that have gone up higher than inflation, like healthcare,” said Mills.
Ensuring that Bowdoin remains affordable therefore relies on strict fiduciary responsibility and the continued success of a strong, stable endowment.
“In order to keep the increase in tuition, the comprehensive fee, at manageable levels, we’re going to have to continue to be vigilant, contain programs, contain costs, and make tough choices,” said Longley.
“You have to be very disciplined in the way you create and deliver a program to make sure in all cases that the program delivered matches the resource you have available,” added Mills. “And one hugely important component of that resource for a place like Bowdoin is our endowment.”