US Educational Institutions Looking Toward Alternative Investments, Says BNY Study

Representatives of US educational institutions have widespread concern about the long term financial health of their endowments and state educational funding, and expect to continue to increase their investment allocations to alternative asset classes, according to a survey conducted at

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Representatives of US educational institutions have widespread concern about the long-term financial health of their endowments and state educational funding, and expect to continue to increase their investment allocations to alternative asset classes, according to a survey conducted at The Bank of New York’s fourth annual “Higher Education Finance & Investment Officers Forum.”

More than 100 senior investment officers, chief financial officers, treasurers and trustees from 65 colleges, universities and independent schools from throughout the country attended the event, which was held last week in New York City.

The survey found that only 25% of respondents thought their institution’s endowment would meet their long term financial needs, down from 34% in 2004; 70% of respondents believe tuition will increase more rapidly than the CPI in the future, but nearly 25% do not believe it will, up from only 6% a year earlier.

While nearly half of the respondents believe their states will cut educational funding next year, 15% expect funding not to be cut, versus only 3% in 2004, and almost 60% of respondents expect their institutions to increase their allocations to alternative investments, with hedge funds and private equity the two most likely choices for allocation increases.

“Educational institutions face intense marketplace challenges in managing their current and future financial and operational well-being. Our annual forum allows such institutions’ finance and investment professionals to share experiences and best practices, as well as explore the emerging issues and trends that may impact their policies and practices in the future,” said Richard Raffetto, managing director and head of the Endowments, Foundations and Nonprofits division at The Bank of New York.

At the forum, Charles Young, PhD, chancellor emeritus at UCLA, president emeritus of the University of Florida, and a senior member at the Knight Commission on Intercollegiate Athletics, delivered the opening keynote address on maintaining the proper balance between academia and athletics. John Fry, president of Franklin & Marshall College, delivered the closing keynote address on how colleges and universities can establish competitive advantage through community economic development strategies.

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