A College Gets a Late Start on Fund Raising

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For decades the State University of New York College at Cortland was not allowed to do any fund raising. Lawmakers discouraged that sort of activity by the 64-campus system, which was to get its support from the state government. New Yorkers were not to be asked to provide any more for the university than they were already paying in taxes.

That explains why Cortland’s endowment is worth just $7.7-million today, an amount largely accumulated through its first fund-raising efforts, which began in the late 1990s. The college is working hard to make up for lost time and money, as are the other SUNY institutions, which, at the urging of Gov. George Pataki, have collectively set a fund-raising goal of $3-billion by 2012. Cortland has raised $11.7-million since 1997. The endowment grew almost 15 percent from the 2003 to the 2004 fiscal years, after increasing in value by almost 16 percent the previous year.

“We’ve definitely come late to the game,” says William E. Shaut, Cortland’s vice president for finance and management. “It’s been a slow go, but we’re pleased with our growth so far.”

The growth of the endowment in the past two years has been due mainly to stepped-up efforts to raise money, rather than improvements in investment returns, Mr. Shaut says. The college hired its first vice president for advancement just six years ago and added four full-time fund raisers in the past two years. With that staff in place, officials are in the preliminary stages of starting a capital campaign. Its goal has not yet been set.

“Where we really want to be,” Mr. Shaut says, “is where private colleges of our size are already at.”

Spending from Cortland’s endowment goes almost entirely to scholarships. The campus has 7,500 students, and about 75 percent of them receive financial aid. Mr. Shaut and his colleagues hope to increase the endowment so it can be used for other things as well.

“It’s all helping students right now, which is great, but it’s not freeing up dollars in the operating budget,” he says. “We have a new education building, a new residence hall, and a new athletic facility, and we’d like to name these buildings. Right now we have no endowed professorships, which is an area we want to push.”

With those big plans in mind, Cortland officials are considering their options for investment and spending and deciding on the best direction for the Cortland College Foundation, a private, nonprofit organization that manages the endowment and solicits donations for the institution.

The foundation takes a conservative approach to its portfolio. By policy, roughly 65 percent of the endowment is invested in stocks and 35 percent in bonds. As of the 2004 fiscal year, about $6.5-million was managed by Commonfund and almost $1.1-million by Strategic Investment Advisors, a firm in Utica, N.Y.

The decision to hire Strategic Investment as a second outside manager was made two years ago and will be reviewed after five years, Mr. Shaut says. Cortland officials felt that as the endowment grew, it made sense to find a second outside manager to bring in another perspective.

That investment approach is paying off for now. In 2004 the return on investment was 16.3 percent (after management fees), compared with an average of 12.4 percent for endowments of the same size, according to an annual endowment survey by the National Association of College and University Business Officers.

Cortland officials shun alternative investments, such as hedge funds and private equity, simply because they don’t have the resources to manage such investments properly. “There are just some investments that we don’t get into,” Mr. Shaut says. “But as we build the endowment, we will decide how to reinvest it.”

Scott Evans, chief investment officer at the Teachers Insurance and Annuity Association-College Retirement Equities Fund and a member of Barnard College’s investment committee, applauds endowment managers who know how to stick to a game plan. But, he warns, there is danger in being too conservative.

“Smaller colleges need to make sure that they are broadly diversifying into asset classes that provide balance with fixed income,” he says. “Broad exposure provides smoother rides.”

Institutions with small endowments often don’t rebalance their portfolios often enough, Mr. Evans says. “It’s like flossing your teeth — it’s financial flossing. You should do it at least once a year. Even small institutions can and should be more proactive about it.”

For now, Cortland is putting more money into the endowment and hopes that fund raising in the next five to seven years will help double the size of the college’s assets.

“The train pulled out, and we stayed in the station,” Mr. Shaut acknowledges. “Right now we’re still new to endowment management. But we’re optimistic.”

Winning donations from alumni who have never before been asked to contribute is proving to be harder than investing the money. Many of the college’s wealthiest graduates have already committed their philanthropy to other causes, Mr. Shaut says.

Cortland officials hope that the task will become easier now that Erik J. Bitterbaum, the college’s president, is traveling frequently to attend alumni functions, and the alumni association is looking for new ways to strengthen the college’s bonds with its 54,000 graduates. “It’s not an easy sell,” Mr. Shaut says. “But we have a story to tell, and we’re putting more resources into trying to get out and tell it.”

WHERE CORTLAND COLLEGE FOUNDATION’S ENDOWMENT IS INVESTED Fixed income: 31.7% Equity: 68.3% Total: $7.65-million SOURCE: Cortland College Foundation

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Section: Endowments
Volume 17, Issue 20, Page B20