The University's endowment - the large sum of invested money that provides Tufts with interest payments - was one of the few of its kind to see positive returns in the 2001 fiscal year. A survey of 50 colleges conducted by The Chronicle of Higher Education reported that 37 of the institutions had negative returns for that year. Half of the schools in the study were those with the largest endowments, and the other half had endowments ranging between $25 million and $1 billion.
According to Tufts officials, this trend-breaking growth is due to intelligent investing and a substantial amount of "gifts and other additions" received in the 2001 fiscal year. The investments' positive returns ensured that no departments would be denied their usual stream of funds from the endowment. They have also guarded against the erosion of the principle.
Vice President of Finance and Treasurer Thomas McGurty said the endowment's objective - successful "asset allocation" - is to "maintain the purchasing power of the endowment so that the income distribution will have as much impact on future budgets as it does today." In other words, to invest endowment funds in a manner that safeguards future cash flows against unpredictable fluctuations. Administrators aim for a total return that accounts for both inflation and future spending.
It is difficult to predict what sort of returns Tufts' investments will have this year. While the returns from July to January were modest, the stock market itself has fallen during that period, McGurty said.
Bond-rating agencies, such as Moody's Investor Services, offer differing predictions for the near future of college endowments. Moody's believes that the full effects of the recession have yet to be felt. The recession has yet to catch up with parents, they say, and enrollment in the most expensive - albeit not necessarily the most prestigious - schools is likely to drop.
Fitch, a smaller agency, has a more positive outlook for higher education. They point out that enrollment is often counter-cyclical, meaning that as the economy worsens, more people enroll, whether to earn degrees or wait out the storm while enhancing their r?©sum?©s.
Tufts maintains a long-term investment policy that cushions it from year-to-year market fluctuations. McGurty said that Tufts' endowment policy is relatively conservative and is not tied to investment performance.
"The payout and investment policies are designed to provide for a steadily increasing stream of payments to the operating budget."
While other institutions, such as Dartmouth, have announced tuition hikes, Tufts is unlikely to follow suit - at least not because of endowment problems, McGurty said. This is because Tufts relies less than other Universities on its endowment, which is much smaller per-capita than benchmark schools. As a result, fluctuations in the endowment have less impact on tuition.
Dartmouth announced recently that its tuition will rise by 4.5 percent next year. According to the University, this is roughly average in other Ivy League schools, although it is a higher rate of increase than it has had for at least four years.
