Chancellor Mark Wrighton says the endowment spending amount will decrease on July 1 and may continue to decrease for the 2010 school year. (Sam Guzik | Student Life)

With the nation dealing with an economic downturn and an increasing unemployment rate, universities and colleges are trying to take prudent steps in investing their funds after drastic reductions in their endowments.

“What we are trying to do, in this era, is to take prudent steps to make sure that we can thrive as we look to the future,” Chancellor Mark Wrighton said.

Because audited reports are released annually, Washington University’s endowment figures are not available during the course of the fiscal year. However, Wrighton estimated that as of the end of December, the University’s endowment was down by about 23 percent compared to the previous fiscal year.

Many universities are reporting large losses in their endowments—losses that seem to echo the 1970s, when the University reported similar financial problems.

“Back in the fiscal year of 1973, there was no increase in the endowment payout [for] Washington University,” Wrighton said. “And then the next fiscal year of 1974, there was a reduction of 10 percent of the spending from the endowment.”

The University also experienced endowment losses between 2000 and 2002. Despite its losses, the University did not have to reduce the spending from the endowment.

The University based this spending on how the endowment fared during the previous five years.

“This July 1, we will have a new spending amount, which may be down about 2 percent,” said Wrighton, when asked to project next year’s endowment spending. “But the next July 1 of 2010 might see a steeper decline if the value of the endowment does not improve.”

Forty percent of the University’s endowment is invested in public equities or publicly-traded stocks.

The endowment’s value can be increased by two means: by receiving new gifts and by making investment decisions that will yield growth in value. The Washington University Investment Management Company, under the direction of Chief Investment Officer Kimberly Walker and a separate committee of the Board of Trustees, decides the target location, strategy and allocation of the investment.

Despite the current economic instability, Wrighton expressed confidence that Walker and her team have solid plans for the University’s endowment.

“We are always looking for new opportunities,” Wrighton said. “In an environment like we are experiencing today, I do not think we have much forward visibility in terms of what will be happening again of the traded companies. But I believe the diversity that we have in our investments is one strategy that should serve us well.”

Compared to previous investment strategies, which mainly concentrated on stocks and bonds, the University now invests in many additional sectors, including real estate. By diversifying the allocations, the investment company and the chancellor hope the problem of one sector is mitigated by the promises of another.

“Tuition has increased,” he said. “But, it is the lowest increase in more than 10 years in terms of percentage. We are trying to retain great faculty, to make sure we have exciting programs and to be able to operate the University; we know we need to make sure we have the revenue stream.”