The Boom In Business School Endowments

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Business school endowments can seem a little like the controversy over income inequality. The most richly funded schools seem to get richer and richer, while the poorer schools pretty much remain poor.

Harvard Business School, for example, was the first school of business to have a billion-dollar endowment–back in the late 1990s. Today, it’s still number one, with a $3.3 billion endowment at a time when only two other schools–both among the richest in the year 2000–also boast endowments that exceed $1 billion: Stanford Graduate School of Business, and the University of Pennsylvania’s Wharton School. By 2020, there’s a strong chance that there will be at least eight schools in the billionaire category, including Chicago Booth, Northwestern Kellogg, MIT Sloan, Yale School of Management, and Columbia Business School.

An analysis of historical endowment data for 49 leading business schools by Poets&Quants shows that endowments have made a very substantial recovery since the Great Recession (see chart above), rising from $10.3 billion in 2009 to $17.2 billion last year. Back in 2001, the combined total endowment at the 49 schools was just $6.9 billion. If current trends continue and the economy stays healthy, endowment value could reach $24.3 billion by the year 2020.

Since 2010, business school endowments rose on average 7.7% per year. However, UC-Davis’s Graduate School of Management grew its endowment 19.1% a year during the same time–the fastest growing endowment in the U.S. Not too far behind is London Business School, with a growth rate of 18.7% because it started from a small base. Another UC-school, UCLA Anderson with a 17.1% yearly growth rate. Michigan State’s Broad School and Babson College have both seen a 12.0% yearly increase, followed by USC’s Marshall School with 11.5% yearly growth (see growth rate table here).

Among the elite M7 business schools, Wharton boasts the highest annual growth rates in endowment, a very healthy 11.4% a year since 2010, followed by Stanford University’s Graduate School of Business at 11.0%. In comparison, Harvard Business School’s annual growth rate was 7.5%, though on a substantially larger base.


On the flip side, the schools with the slowest growing endowments are either not raising much money or investing for the future, be it facilities improvements or other developments. Ironically enough, the slowest growing endowment is that of another UC school, UC Irvine’s Merage with a 3.1% growth rate, which recently invested some of its endowment into their campus entrepreneurial hub: UCI Applied Innovation. Vanderbilt’s Owen school has also seen relatively slow growth since 2010, with 4.6% yearly growth along with Syracuse’s Whitman school with a 5.2% yearly growth. Michigan Ross is also growing relatively slowly, with a 5.5% annual growth rate since 2010.

Schools at the turn of the century looked much different than they do today. Institutions had just recovered from the dot-com bubble, which did not affect most endowments as dramatically as the 2008-2009 crisis. The gap between Harvard and Stanford was only $1 billion instead of the current $2 billion. Twenty schools had endowments above $100M and below $500M (Harvard was the only exception) so the “endowment gap” was small.

Fast forward to today and you’ll notice that endowments are starting to play a much bigger role in business schools. Greater endowment distributions are generating greater revenues for schools, allowing them to grant more scholarships to attract the best talent, hire the best faculty and staff, and keep their campuses new, or looking like new.


What causes endowments to change in value? It’s not simply a function of investment returns, though upswings in the markets certainly help to boost endowment values. But growth is more often than not a function of contributions from corporations, alumni and friends. And endowments are reduced for the yearly distributions (normally about 4.5%) which goes to fund faculty, student scholarships and programs.

In the not-too-distant past, endowments did not play as large a role in business school budgets. Today they have grown significantly and are starting to have a stronger influence on the competitive race among the schools. That influence will continue to grow into the future, giving the schools with larger endowments an edge when it comes to developing their programs, absorbing future economic shocks, and maintaining their elite reputations into the future.

(See following page for our historical data on nearly 50 business schools)

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