Local college and university endowments, some highly leveraged in aggressive and risky investments, are seeing large losses as the market continues to swoon. But few institutions are taking the losses to heart, as most do not rely heavily on the funds to cover yearly expenses.

Providence College’s endowment dropped 31.2 percent from a September 2007 high of $162 million to $139 million, as of last Sept. 30. As of Oct. 31, Salve Regina University’s endowment saw a 23-percent drop from January, and stood at about $33.1 million.

Roger Williams University reported a 19.2-percent drop from June 30 to Oct. 31 this year, bringing the endowment total to $81.5 million.The University of Rhode Island’s endowment dropped 18 percent, to $73.9 million, between Dec. 31, 2007, and Sept. 30.

The losses at those schools and Rhode Island’s other institutions of higher learning are in keeping with what colleges are seeing nationally.

Harvard University, with the nation’s largest endowment, disclosed that its fund lost $8 billion, or more than 22 percent of its value, since last summer. The endowment currently stands at $36.9 billion.

Financial analysts anticipate that losses for endowments nationwide could reasonably reach 30 percent. Still, university officials say that they are sticking with their game plans.

Roger Williams cashed out about $14 million of its endowment in 2007 in preparation for payments to a $90-million capital campaign, which helps in the current market, says James C. Noonan, the university’s vice president of finances.

The bulk of the endowment portfolio, however, is leveraged in high-yield — but also relatively high-risk — investments, and that is not expected to change, even though those are the market sectors suffering the most.

Nearly 60 percent of the endowment’s holdings are in domestic and international equity (individual stocks and mutual funds) and 13 percent in private equity, hedge funds and real estate. It’s not an unusual mixture of investments, when compared with those of other local universities.

The URI endowment, for example, is about 74 percent invested in equities and hedge funds (actually a fund of hedge funds) and just about 22 percent in domestic and international bonds, which are traditionally more conservative holdings.

“Obviously we are monitoring our actual expenditures and make adjustments accordingly,” says Noonan, of Roger Williams. But “based on the first four months of activity [in the fiscal year], we are confident we will meet our plan for the year.”

On average, endowments aim for an 8-percent return on investments in the long term and, at least in Rhode Island, colleges and universities take out about 5 percent each year for scholarships, capital projects, faculty positions, and general operating expenses.

PC, for example, took out just 4.5 percent, or $5.1 million, this year for scholarships and one-time expenses, including capital improvements. That amount represents just a fraction of the university’s $140-million annual operating budget.

Ivy Leaguer Brown University is the sole exception to the rule in Rhode Island with respect to endowments.

As part of an elite group of American universities that can draw millions of dollars in revenue each year from their endowments, Brown does rely on the fund (which stood at $2.8 billion as of June 30) to pay for about 15 percent, or $111 million, of its $735-million operating expenses this year.

A university spokesman this week declined to give an update on where the endowment stands currently, but like universities elsewhere, it has imposed a hiring freeze and is reassessing capital projects and other major expenditures in light of market conditions.

“The fact is we are not as hurt by the market in our operating budget because our endowment contributes such as small piece to the university’s operation,” says William B. Hall, Salve Regina’s vice president for administration and chief financial officer. “Obviously, we would love to have to deal with the problems of having a large endowment like Harvard or Brown.”

The Newport-based university will take out about $1.5 million from its endowment this year to fund scholarships.

Academic institutions such as Salve Regina tend to treat their endowments much like a young person with a relatively new 401(k): they’ve spent years building up the funds and continue to do so, but as they intend to tap into its resources as time progresses, the hope is that what they put in is there and then some.

“It’s a paper loss at this point,” says Hall. “If this was a permanent loss, or if we had to cash out large amounts now for some reason, that would be a different thing.”

At the University of Rhode Island Foundation, President Glen R. Kerkian says that the university, which made a leap into riskier investments when the market was red-hot, is still looking at those same sectors even though they have been badly hit.

“We think there are opportunities in the current market … we’re in it for the long term,” he says.

Rhode Island public universities’ and colleges’ concern now is the state of the state’s finances. Already there has been talk of tuition hikes and changes to the higher education system.

That highlights a problem shared by those colleges and universities, both public and private alike, that do not rely on their endowments: as the market continues to decline and unemployment continues to rise, the institutions anticipate a decline in enrollment, which directly affects yearly revenue, since many of the institutions are dependent upon tuition almost exclusively to pay operating expenses.

“Job loss affects parents, and it impacts how they will be able to get their students back to the university,” says Hall, of Salve Regina.

So far, universities and colleges say that they are confident that many of their students will return for the spring. Whether the same can be said in the fall is unclear.Spending continues to drop

U.S. consumer spending falls for a fifth straight month, the longest stretch of declines in government records that go back to 1959. Economists don’t think the hard times will end anytime soon. C1

pmarcelo@projo.com