Category Archives: Philanthropy

Will Morehouse’s 2019 Class Be The Greatest Donors In HBCU History? After Robert F. Smith’s Donation, They Better Be


“The results of philanthropy are always beyond calculation.” – Mary R. Beard

By now we have all heard the breaking news, on May 19th in the year of our lord 2019, Robert F. Smith, an angel of God descended upon the sacred grounds of the AUC in Atlanta, Georgia and in his commencement speech to an estimated 400 Morehouse College graduates also pledged to ensure that his family would pay off each and every one of their student loans. The grant is estimated to be a gift valued at $40 million making it the second largest donation to the HBCU community, still trailing Bill and Camille Cosby’s gift of $20 million in 1988 to Spelman College, which adjusted for inflation is valued at $43.2 million today. Stating the obvious, there still has yet to be a gift of $100 million or more in HBCU history, while HWCUs received 13 gifts of $100 million or more in 2018 alone. This is not to take away at all from Mr. Smith’s gift as the reality that the return on investment to HBCUs  on gifts of $10 million or more are often worth a multiplier effect because of the size of our schools, how starved we are for donations of any sort especially major ones, and lastly our schools often being so adept at doing more with less that when we get more it often feels like it maybe overwhelming (it is not, please feel free to give any HBCU $100 million, seriously). But what will this gift mean to the HBCU landscape for the coming generation?

You hear it all the time among recent HBCU graduates and alumni when asked what are some of their primary reasons for not giving back. At the top of the list tends to pertain to the burden of their student loan debt. It is no secret that HBCU students bear a serious burden when it comes to student loan debt in comparison to their HWCU counterparts, especially those counterparts who attend an institution that is among the Top 50 in college endowments. In our 2016-2017 HBCU Graduate Student Loan Report, 86 percent of HBCU graduates finish with student loan debt at a median debt load of $34,131 versus 40 percent of Top 50 college endowment graduates who finish with student loan debt at a median debt load of $24,237. This is due to a mixture of factors, most notably HBCU endowments and familial wealth.

The top 30 college endowments in America control over 50 percent of the nation’s $500 billion college endowment value, while 100 plus HBCUs control less than 1 percent. Combine this with the African/European American wealth gap not moving for 50 years, which according to a Forbes article, “African-Americans had a median wealth of $13,460 in 2016 or only 9.5% of the median wealth of $142,180 of whites”. These major pinpoints make it extremely difficult for HBCU graduates to reduce their student debt loads while matriculating and therefore build wealth after college. The result becomes they are either prolonged before they can become donors or never do and the sword of educated poverty is what they and our institutions fall upon decade after decade with no end in sight.

Morehouse College Class of 2019 though sits in a special position to change the trajectory of not only Morehouse College’s endowment, which we have argued has grossly under performed compared with the likes of Hampton, Spelman, and Howard in its fundraising efforts. This despite the help from the likes of another billionaire, Oprah Winfrey, who herself as put hundreds of Morehouse Men through college as well. To what extent her giving to Morehouse has reduced student loan debt for graduates is unknown, but knowing Ms. Winfrey’s giving history, it has been formidable. However, the Class of 2019 may prove to be worth a longitudinal study in HBCU philanthropy. What happens when an HBCU graduate finishes with little or in this case no student loan debt? Do they see it as an opportunity to be more active donors back to their institution and to other HBCUs. Will their donor rate be higher than other classes? It is no secret that despite the Morehouse pride, the alumni giving rate at the institution has been underwhelming at best. If these 400 young men properly build their wealth and give back to Morehouse and other HBCUs, then have we potentially unlocked one of the keys to making our institutions sustainable? We have also long argued what it would look like if African Americans supported HBCUs in a major way, even if they did not attend an HBCU. Giving because a strong African American institution of any sort is a reflection of themselves in society and that our fates are always intertwined. That a people are ultimately only as strong as the institutions that represent their interest.

However, to do what Robert F. Smith did on an institutional level is going to require more than just one billionaire (or even two), but it is definitely a pivotal step in the right direction – hopefully. After all, it has been over three decades since a donation of this size for HBCUs. The lack of multimillion dollar gifts to HBCUs and African American educational institutions in general has been, continues to be, and is problematic systemically. For instance, if we extrapolated the notion of helping HBCU graduates be debt free, endowments at our institutions would have to be exponentially greater than what they are now. Howard University, Spelman College, and Hampton University, the three largest HBCU endowments, which have current endowments of $688 million, $389 million, and $285 million, respectively, would need endowments exceeding $6 billion, $1.7 billion, and $2.5 billion, respectively. In other words, they currently have a combined endowment value of $1.4 billion but need $10.2 billion, which is a margin of $8.8 billion, greater than Robert F. Smith and Oprah Winfrey’s wealth combined, an estimated $7.6 billion. This of course speaks nothing of and to the number of HBCUs who are hanging on for dear financial life and whose endowments if they even exist are paltry at best. Like many small and state colleges, lesser known HBCUs struggle to attract major donors, but the Morehouse 400 does/should know who they are and should take the vanguard in being integral over the next 50-60 years of ensuring that all HBCUs drink from the fountain of opportunity that they have been granted access too. These young men have a chance to alter the trajectory of the HBCU universe and we hope with this great opportunity they have been gifted that they also know comes a great responsibility. Will they become the greatest HBCU donors in HBCU history? Only time will tell.

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Locked Out: HBCUs Only Receive 3 Of The 460 Donations Of $1 Million Plus To Colleges In 2017


If charity is any economic indicator, then wealthy donors have retrenched their nervousness about the economy as a whole. Two years ago, $1 million dollar plus donations to colleges and universities were under 500 such charitable gifts for the first time since 2012. Last year, that was reversed to almost 600, but the reversal was not to be sustained in 2017 where once again less than 500 donations – only 460 to be exact were of the $1 million dollar plus variety to colleges and universities. The largest donation made its way to UC-San Francisco to the tune of $500 million by the Hellen Miller Foundation whose source of wealth stems from real estate. For perspective, this donation is an amount equal to twenty-five percent of all HBCU endowments combined.

For HBCUs, the trend has been a constant struggle to get back to 2014 when nine such donations were made to our institutions. Since that time, not more than five have occurred in a given year in the past three years and this year marks the lowest number with only three donations of $1 million plus. That HBCUs can not even garner three percent (the number that HBCUs represent as a total of all American colleges and universities) marks a continued challenge in the financial arms race that is happening among higher education institutions as the shifting landscape of the 21st century unfolds. Without the transformative donations, HBCUs remain reliant on tuition revenue and at risk in competing for talent both among faculty, students, research, and infrastructure. What is the solution to this philanthropic Rubik Cube? As with most problems, there is more than one solution, but there is no doubt those solutions need to come fast and soon.

If you need perspective on just how large the gap is between the largest donations to HWCU/PWIs and HBCUs is – the top three PWI donations totaled $969 million. In contrast, HBCUs top three donations totaled $3.7 million, an amount that is 262 times less.

1. Orlando L. Clark (pictured above) – $1.59 Million
Recipient: Tuskegee University
Source of Wealth: Health care

2. Antonio Clayton – $1.1 Million
Recipient: Southern U. System Foundation
Source of Wealth: Law

3. George & Jill Hamilton – $1 Million                                                        Recipient: North Carolina Central University
Source of Wealth: Chemicals

Source: The Center for Philanthropy

 

2016’s Million Dollar Donations Come Roaring Back For PWIs, But For HBCUs Not So Much


After a timid 2015 where colleges and universities only saw 482 donations and pledges over $1 million, this was the first time since 2012 that less than 500 such donations had been made, donors came roaring back in 2016 with the largest amount of $1 million or more donations ever with 567 such donations and pledges according to The Center of Philanthropy. However, a rising tide does not always lift all boats as HBCUs witnessed. After a banner year in 2014 of nine gifts of $1 million or more that totaled $20.5 million, HBCUs only saw four in 2015 for a total of $7 million. The 2016 numbers are a bit better than the prior year, but not by much.

HBCUs in 2016 received five donations of $1 million or more for a total of $10.5 million. The leading donation comes from Calvin and Tina Tyler (pictured above with Morgan president David Wilson), who gave $5 million to Morgan State University to endow a scholarship for incoming freshmen from the Baltimore area. A gift that should help increase Morgan State’s ability to compete and keep the talent in their backyard at home.

The arms race that is fundraising continues to be an uphill battle for HBCUs who are dealing with a significantly smaller alumni base due to desegregation’s impact a generation ago. African America’s abandonment of most of their own institutional ownership has seen a starvation of institutions that were built to serve African America’s interest almost to the point of extinction. Whether or not a new awakening is on the horizon is more hopeful than optimistic.

To note, Morgan State University becomes the first HBCU since we began tracking in 2013 to appear more than once.

1. Calvin & Tina Tyler – $5 Million
Recipient: Morgan State University
Source of Wealth: UPS

2. James & Marilyn Simons – $2.5 Million*
Recipient: Morehouse College
Source of Wealth: Finance

3. Leonard & Louise Riggio – $1 Million                                                        Recipient: Spelman College
Source of Wealth: Retail

4. Sean Combs – $1 Million*                                                                                    Recipient: Howard University
Source of Wealth: Entertainment

5. Joe Jr. & Kathy Sanderson – $1 Million
Recipient: Alcorn State University
Source of Wealth: Food & Beverage

*Pledge

Source: The Center for Philanthropy

 

The 20 Year Review: 1996 & 2016 HBCU Endowments Then & Now


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The 2016 HBCU Money’s Top 10 HBCU Endowments list is out. NACUBO’s list this year included 815 reporting institutions from the U.S. and Canada. Here are a few fast facts of then and now in regards to HBCUs place in the whole of the endowment conversation.

  • Of the 815 reporting institutions in 2016, only 1.8 percent were HBCUs. HBCUs comprise 3 percent of American colleges and universities. In 1996, Of the 467 reporting institutions in 1994, only 0.8 percent were HBCUs.
  • 20 years ago, the 4 HBCUs who were present on the list had a combined endowment value of $468.2 million versus the top 4 HWCUs who had a combined endowment value of $23.8 billion.
  • The endowment wealth gap between the top HWCUs/HBCUs in 2016 was 101:1. In 1996, it was 51:1.
  • In 1996, 20 HWCUs reported endowments over $1 billion and 3 HBCUs reported endowments over $100 million. In 2016, there were 93 HWCUs with reported endowments over $1 billion or an increase of 365 percent. HBCUs increased their ranks of $100 million endowments from 2 to 5 or an increase of 150 percent – unchanged from the 1994 to 2014 review.
  • The 101:1 gap currently is actually a decrease from our 2014 review where the gap was 106:1. A significant 4.7 percent decrease.
  • Of the 805 within the United States, 74.3 percent of the $515 billion in endowment value is controlled by 11.3 percent or 91 institutions.
  • The favorite investment of endowments above $100 million is alternative strategies*, which for endowments above $1 billion make up 58 percent, between $501 million to $1 billion make up 45 percent, and endowments $101 million to $500 million constitute 35 percent of their portfolio.
  • While the majority of HBCUs fall well under the $100 million sphere, the favorite investment among those groups are domestic equities, constituting in the range of 33 to 44 percent of portfolios under $100 million.

*Alternative strategies are categorized in the NCSE as follows: Private equity (LBOs, mezzanine, M&A funds, and international private equity); Marketable alternative strategies (hedge funds, absolute return, market neutral, long/short, 130/30, and event-driven and derivatives); Venture capital; Private equity real-estate (non-campus); Energy and natural resources (oil, gas, timber, commodities and managed futures); and Distressed debt. On-campus real estate is included in the Short-term Securities/Cash/Other category.

The Endowment Edge: A Conversation With Virginia State University’s Mr. Kevin Davenport


HBCU Money’s editor-in-chief, William A. Foster, IV, sits down with the VP of Finance at Virginia State University located in Petersburg, Virginia. Some of the highlights were how HBCUs can close the wealth gap between HBCU and PWI/HWCU endowments, HBCU financial transparency, and more as Mr. Davenport helps lead VSU’s financial health into the second half of the decade with a continued eye on the generations ahead.

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Mr. Davenport, thank you for taking the time with us. Let us start with telling us a bit about yourself and how you came into your current position? I have worked in higher education finance for over 25 years. I’ve served in a leadership capacity at both public and private institutions and at institutions as large as 35,000 students and as small as 1,000 students. I have a broad finance background which includes hands-on experience with cash management, endowments, investments, budgets, financial statements, audits and financial analysis.

I have served both HBCUs and PWI/HWCUs. I have been Chief Fiscal Officer (CFO) at three HBCUs in Virginia—Virginia Union University, Virginia State University and Saint Paul’s College. I have also served as Treasurer at a PWI/HWCU in Virginia—Virginia Commonwealth University and several of its related foundations (VCU). At VCU, I managed a university working capital pool of about $350 million and oversaw the financing of over $600 million in capital projects. I also serve on the City of Richmond Retirement System Board and Advisory Committee, which oversees approximately $500 million in retirement funds.

I’m a graduate of an HBCU— Hampton University with a Bachelor of Science degree in Accounting. I am also a Certified Public Accountant and have earned an MBA from the College of William and Mary and an Ed.S from George Washington University.

Virginia State University and its foundation combined have one of the largest endowments among HBCUs. For those who are unclear about the dynamic of there being two separate endowments, can you give us a bit more detail of why they are separate? How does their separation impact each investment strategy? The university has a $46 million endowment. About $32 million (or about 70%) of the endowment is managed by the University and the remaining $14 million (or 30%) is managed by a related foundation. Like most public universities, VSU established a foundation to allow greater autonomy in managing assets like endowment funds. After the foundation was established, some donors wanted their contributions to continue to be deposited to the University. Since then, the University continues to give its donors and alumni the option of donating to the university or the foundation.

Each endowment is governed by its own investment policy, spending rate and asset allocation targets. The endowments are managed separately, but their investment philosophy and strategies are similar. Both endowments are well diversified portfolios and conservatively invested to protect against a downturn in the market.

There seems to be concern among HBCU alumni who do not think the endowments of HBCUs are transparent enough and therefore create hesitancy to give. What can be done by HBCUs to allow for their alumni base to feel like there is a clear understanding of how their donations are being invested, allocated, and reinvested? I think HBCUs must ensure the highest level of transparency and accountability to its alumni and donors who establish endowment funds. Alumni and donors should receive a report each year detailing the activity in their individual endowment funds. This report should include total dollars for contributions, earnings, distributions and fees made to and from the endowment.

Most universities charge an internal administrative fee to cover costs for administering the endowment. HBCUs need to ensure these administrative fees are fully disclosed to donors and alumni. Sufficient detail should be provided on how the fees are calculated, how the fees are collected, and what the fees are being used for. Governing bodies need to make sure they review and approve all fees periodically.

It is also a good best practice to have donors and alumni sign an endowment agreement at the time the endowment is established. This agreement should provide donors with a clear understanding of how donations are being invested, allocated and reinvested.

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The endowment gap between PWI/HWCUs and HBCUs has grown from 46:1 in 1993 to 106:1 today. What do you think are some ways that gap can start to be closed, especially with HBCUs facing mounting financial pressure? Is there anything Virginia State University is doing in particular? HBCUs can provide greater emphasis on endowment growth. This is a challenge, especially as many HBCUs face more immediate and pressing needs. But administrators have to fight to make it a priority. VSU is aggressive in reaching out to our alumni and donors about the benefits of endowment giving. Our fundraisers include it in their fundraising literature and make it a priority in soliciting funds from alumni and donors.

HBCUs can also work with their governing boards to establish prudent investment and spending policies. A solid investment strategy can help HBCUs earn more on their endowments, thus grow their endowments to help close the gap.

 Over the summer, a ground swell occurred that has spurred many African Americans to move their banking relationships to African American owned banks and credit unions. Very few HBCUs have banking relationships with African American owned banks, while we know you can not speak for other HBCUs, can you explain Virginia State University’s current relationship with any African American owned banks if any? And what does it say that there is not more husbandry between HBCUs and African American owned banks? VSU does not have any formal relationships with African American owned banks or credit unions. There is a nearby credit union that bears the name “Virginia State University Credit Union”, but the entity has no legal association with the University.

In terms of investment strategy, does Virginia State University primarily internally manage its endowments; use external managers, or a mixture of both? The University engages professional investment advisors and managers to help it oversee its endowment funds. The investment advisors and managers have discretion to invest the funds according to a board-approved investment policy. The investment policy allows the endowment funds to be invested in a diversified investment pool which includes domestic and international equities, fixed income, hedge funds, real estate, and private equity.

The current macro environment in the United States of the zero interest rate policy by the Federal Reserve for the past decade has changed the way many individual and institutional investors set strategy. How do you think it has impacted smaller endowments like HBCUs versus the Big 30 college endowments? Because of the current low interest environment, institutional investors have had to go elsewhere to make money. Institutional investors at the Big 30 college endowments have increased their allocations to non-traditional and riskier asset classes such as private equities, international equities, hedge funds and real estate. Smaller endowments, like at HBCUs, have a harder time accessing these non-traditional asset classes. Further, the Big 30 endowments have been able to hire high-paid Chief Investment Officers (CIO) and specialized investment professionals to help them earn greater returns. Smaller endowments are not able to pay CIOs and their staffs. As such, the smaller endowments continue to lag the investment performance of the Big 30 endowments thus continuing to increase the performance gap.

In following up on that last point, given that 30 colleges & universities control 52% of America’s $500 billion college endowments and 100 times all HBCU endowments combined, what are your thoughts on a policy that would redistribute some of PWI/HWCUs endowments to HBCU coffers or incentivize large donors to give to smaller endowments? I like the idea of incentivizing donors to give more to smaller endowments. Perhaps, donors can receive a greater tax break when donating to smaller endowments like the ones at HBCUs.

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Student loan debt seems to have direct correlations to college endowments, regardless of the school’s cost. We noted in our last report that despite being cheaper, HBCU graduates are finishing with an average of $30,344 in student loan debt versus the top 50 college endowments who finish with $22,020. Coupled with African America’s wealth being sixteen times less than their counterparts this makes student loan debt a compounding issue for wealth building. Is there a more active role HBCUs can take in helping close the wealth gap in the coming decades for African American families? I think the major driver for greater student debt at HBCUs stems from family wealth. According to a recent study done by the State Council of Higher Education in Virginia, the average family income of a student at the public HBCUs in Virginia is about $30,000 per year as compared to an average of about $60,000 per year for the other public universities. In fact, the average family income for some of the largest Virginia universities was over $100,000 per year. Additionally, over 85% of VSU’s undergraduates receive need-based financial assistance which is much larger than PWI/HWCUs. HBCU students struggle to pay the costs so HBCUs must keep their cost of attendance low compared to other PWI/HWCUs. A larger endowment would certainly help HBCUs fill their student’s need and thus reduce their debt burden.

For those interested in one day becoming the head of a university endowment what advice would you give them? If you are interested in heading a university endowment, my advice is to understand that your responsibilities go much further than merely overseeing institutional investments. At a college or university, you would be required to regularly communicate to a broad range of constituents such as donors, alumni, students, faculty, governing boards and administrators.

Thank you for your time; in parting do you have anything you would like to add? No.