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Larger endowments are defining factor in colleges’ ability to access capital markets, according to groundbreaking study


February 7, 2006, BOSTON -- Colleges and universities with the largest endowments have the highest debt ratings and, therefore, the greatest access to capital markets, according to a new study commissioned by The Boston Consortium for Higher Education.

The study, conducted by Campus Business Advisors, LLC, and underwritten by Bank of America, is the first to examine the endowment and debt management practices of the more than 50 colleges and universities in New England.

Endowments are a powerful force in New England schools, generating $3 billion a year available for discretionary spending. Those revenues, in turn, contribute to the financial strength and borrowing capability of those institutions.

More than half of the debt at New England schools examined in the survey -- $7 billion of the $12 billion total -- is to16 high-grade institutions rated AA or better.

Although schools in New England account for 5 percent of the national student body, their endowment assets represent 23 percent of the national endowment total ($62 billion of the total $267 billion in 2004), the study found. Even excluding the top three most heavily endowed schools, endowment assets of New England schools equal 12 percent of the national total, at more than $20 billion.

The findings underscore the growing importance of endowment income to the revenues that support higher education in New England.

Endowments are important to an institution’s ability to access capital markets at the most attractive rates, said Glenn Strehle, managing principal of Campus Business Advisors and former MIT treasurer, who co-authored the study with Ann Bernstein Eisenberg, a consultant for the firm.

Endowment assets are important as a base for measuring the financial strength and borrowing capacity of independent institutions,” said Strehle. “Institutions with the largest endowments have double-A or better bond ratings based on their institutional financial strength.”

The study also found that while most schools have developed an endowment investment policy, they do not give the same attention to developing a policy for managing debt.

“The development of debt management policies has significantly lagged the adoption of endowment management policies by colleges and universities,” Strehle said. “Communications on debt management both within and outside institutions will be enhanced with the adoption of such policies.”

A debt policy provides the basis for the prudent use of debt to finance capital projects and for other institutional purposes, Strehle said. “The policy should define the types of projects and activities to be funded with debt and the strategic criteria by which they will be prioritized within the institutional mission and objectives.”

Greater discipline in managing debt will be needed as interest rates rise and market volatility continues to impact invested assets, he said.

To request a copy of the study results, please contact Donna Czerwinski at

About The Boston Consortium For Higher Education
The Boston Consortium for Higher Education was established in the fall of 1995 by the chief financial officers of 11 Boston-area colleges and universities to serve as an external resource in creating a collaborative environment among member institutions for the development and practical implementation of cost saving and quality improvement ideas. Membership has grown to include 13 schools: Babson College, Bentley College, Berklee College of Music, Boston College, Boston University, Brandeis University, Harvard University, Massachusetts Institute of Technology, Northeastern University, Olin College, Tufts University, Wellesley College and Wheaton College.

About Bank of America
Bank of America is a leading financial services provider to colleges and universities, serving 82 percent of the top 50 national universities and half of the top 100 national universities. Banc of America Securities is the #2 underwriter of tax-exempt securities for higher education institutions nationally by number of issues year-to-date. 1 In addition to $9 billion in loans outstanding to educational institutions, Bank of America Philanthropic Management manages assets of nearly $30 billion.

About Campus Business Advisors, LLC
Campus Business Advisors, LLC, based in Wellesley Hills, Mass., consults with colleges and universities leaders on the use of effective business practices to improve service and generate revenues and/or cost savings. Areas of focus and expertise include endowment and debt management, auxiliary services management, and shared support services.

1 Source: Thomson Financial Securities Data Corporation for Banc of America Securities LLC as of December 12, 2005.


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