School Name: Tuskegee University
Median Cost of Attendance: $25 500
Undergraduate Population: 2 684
Endowment Needed: $1 368 840 000
Analysis: Tuskegee University needs approximately $1.3 billion to allow all of its undergraduate students to attend debt free annually. Tuskegee University, although not appearing in our top 10 HBCU endowment lists in 2010 or in 2011 because the school does not report its endowment figures to NACUBO, which tracks the nation’s largest endowments in higher education, is reported to have the sixth largest HBCU endowment at approximately $107 million. Of the five HBCUs with over $100 million endowments and an undergraduate component, Tuskegee ranks fourth in the group in terms of endowment capital per undergraduate. The university is the flagship HBCU in the state of Alabama. It holds the distinction of being the only private HBCU that is a recognized 1890s HBCU and thus able to receive federal funding for agriculture like its public counterparts. With the Tuskegee brand, historically and nationally recognized, it is rather baffling that Tuskegee’s endowment is not considerably larger. At its current undergraduate trending size, it is hard to see Tuskegee competing to become the first HBCU to achieve a billion dollar endowment. This despite having an extremely healthy alumni giving rate at reportedly 20.8 percent versus a national average of 13.5 percent. It has the brand and the alumni support certainly but there is clearly something missing.
Tuskegee could make up ground with a major advantage it currently has over all HBCUs. LAND. It is far and away the largest landowner among HBCUs and one of the largest landowners among higher education institutions period. This advantage allows it the potential to develop a timber asset class in its endowment portfolio without having to bring in an institutional manager as it could serve as its own manager and developer through its agriculture department. Timber was the only asset class during the last recession to NOT decline. With a large enough investment in timber, private institutional managers typically require clients to invest a minimum $50-100 million investment for timber, in 15 years Tuskegee could gain significant ground. It will be no easy task given the minimum investment is currently the size of Tuskegee’s entire endowment and at a minimum would constitute 50 percent of the school’s endowment. Timber is also a highly illiquid asset which is why it usually constitutes no more than 5 percent of an investor’s portfolio.
The school has served itself well by remaining on the Division II level through athletics and not requiring the enormous outlay often needed to play on the Division I and I-AA levels therefore allowing it to invest cash in its academic and research infrastructures. Something it should continue to hold steady to.
Overall, the school has all the right ingredients but its endowment capital per undergraduate lags sorely behind its peers. For perspective Spelman’s endowment capital per undergraduate is approximately $150,000 per undergraduate while Tuskegee’s is approximately $40,000. Although a healthy alumni giving rate, just how much the alumni is giving per donation on average is unknown and could be an area of concern and/or opportunity. The endowment’s portfolio returns also could be questionable in comparison to its peers as another reason for the gap between itself and other HBCUs in the $100 million endowment club if the school’s investment strategy is too conservative. Tuskegee should easily be a top three endowment but it is sorely in need of an eight figure donation within a fiscal year soon if it wants to be considered a serious player in the race to a billion.
As always it should be noted that endowments provide a myriad of subsidies to the university for everything from scholarship, faculty & administration salaries, research, and much more.