June 12, 2012

Dartmouth's Endowment, Past & Present

Two weeks ago, a Dartmouth administrator was quoted in The D defending the College against criticisms launched by the group styling itself the Friends of Eleazar Wheelock. Responding to claims that mismanagement has led Dartmouth's endowment to underperform compared to peer institutions, the College's spokesman Justin Anderson suggested that the endowment has, in fact,
Overall, Dartmouth’s endowment has performed in the top-quartile for the 10-year period ending June 30, 2011 within three applicable universes of higher education and/or non-profit institutions.

Figure 1: Dartmouth Growth in Comparison (Enlarge)

Joe Asch '77 over at Dartblog rightly questions this assertion. But given Mr. Asch's tendency to question -- and often criticize -- any claim by College officials, we at Little Green Blog wanted to examine Mr. Anderson's words for ourselves.

What we discovered suggests that Mr. Asch has stumbled across a molehill, but not quite a mountain. Mr. Anderson intentionally misleads by asserting that the Dartmouth endowment has not performed worse since 2000 than it did in the decade previous; but taken in sum, the endowment has not performed too poorly.

On it's face, Mr. Anderson's claim may be true -- it is hard to judge, because he does not supply the "universes" of other institutions to which he is comparing the Dartmouth endowment. And, as as they do far too frequently, The D's reporter failed to investigate further. We find utterly clear, however, the preposterousness of comparing the College to a bunch of universities and other nonprofits, regardless of size or function.

Using the National Association of College and University Business Officers (NAACUB) data on endowment values dating back to 1990, we can compare Dartmouth to her peers. For those interested, here is the data I collected from their website. Enjoy.

What do the data show? Well, comparing Dartmouth to the other top-20 (technically 24 to account for fluidity and to capture Brown, which does not make the top-20) paints a muddied picture.

First, Dartmouth is nowhere near the top quartile for any extended period of time. By computing the percent change from year-to-year from 1990 to 2010, Dartmouth averages just outside the fiftieth percentile.

Second, the College ranks far lower amongst this group from 2000 to 2010 than it did in the decade previous. From 1991 to 2000, the College's average growth rank was 11th of 24 institutions. From 2001 to 2010, we slipped to 15th.

Figure 2: Dartmouth's Growth Rate Ranking (Enlarge)

This lends some credence to Mr. Asch's claim that the College underperformed for the past ten years, and theoretically supports the arguments proffered by the Friends of Eleazar Wheelock. Mr. Asch actually points to fairly powerful statistic: that Dartmouth's endowment grew quickest from 1991-2000, but slowest from 2001-2010.

Yet, the data suggests a more complicated picture. As Figure 2 shows, the data are highly volatile. At some points in the decade derided by Mr. Asch, Dartmouth ranked in the top 10 on endowment growth; and at other points, the decade touted by Mr. Anderson sports Dartmouth near the bottom. And yes, the irony is that these two decades are one in the same.

When examined from afar, the College's endowment rarely grows at a greater or more languid clip than her peers. Referring to Figure 1, Dartmouth's endowment tends to follow pretty closely her Ivy League brethren (in red) and, more loosely, her other peers. Or, as we can see in Figure 3 below, the College's endowment rarely strays far from the median rate of growth. (To zoom in: 1991-2000 and 2001-2010)

Figure 3: Endowment Growth in Perspective (Enlarge)

So the statistic Mr. Asch cites is technically correct, but the period from 1991 to 2000 ends with an anomalously high growth rate, thus making the entire decade look bullish. The full decade shows an average rate of growth at 13 percent (compared to the average over all schools at 10 percent); omitting 2000, when the endowment shot from $1.7b to $2.4b, shows Dartmouth hanging out, as she is wont to do, right around the average rate of growth of her peers.

In sum, Mr. Anderson's claims fail to pass muster. Compared to other institutions of similar size, wealth and prestige, Dartmouth's endowment has not outperformed expectations. In fact, Dartmouth slipped a bit in the past decade.

And though we cannot get carried away in concluding that Dartmouth's endowment has collapsed compared to the other Ivies, we must recognize that she has slipped some, and urge management in Parkhurst to take heed of that trend.

1 comment:

  1. I am afraid that you are lost in the weeds here. A clearer picture can be had by comparing the % growth of the College's endowment between 1990-2000 and then 2000-2011 with our Ivy peers. They were investing under the same conditions as we were. The results are clear: Dartmouth had the fastest endowment growth in the first period and the slowest in the second one.


    Statistics and annual medians are less important than money in the bank over time.