As institutions and investment consultants increasingly look for opportunities to pinpoint and work with diverse asset managers, a segment of investors overseeing endowments for historically black colleges and universities also is in the market, either as a matter of formal policy or informally, setting diverse manager searches and hires as a priority for staff.
Officials at HBCUs are simultaneously ramping up their capital-raising efforts to grow their endowments, sources said.
Keon Holmes, a managing director at investment consultant Cambridge Associates LLC, Boston, has found that "a number of (HBCUs) are making growth of their endowments a priority and are investing in their development offices in order to raise dollars within and outside their alumni networks," he said an email.
These institutions also have shown an interest in working with minority-owned asset managers, Mr. Holmes noted.
"A subset of HBCUs have incorporated language into their investment policy statements indicating a desire to unearth and hire minority managers. Other institutions may not have formalized this as a written policy but have stated this as an implementation priority," he continued, adding this increased interest in diverse managers has surfaced across Cambridge's larger client base.
Among 101 HBCUs in the U.S. Department of Education's Integrated Postsecondary Education Data System, 48 schools submitted data on their endowment assets, which, combined, totaled $2.7 billion as of the end of fiscal year 2017. The largest endowment on the list belonged to Howard University, Washington, which at the time had $647 million (the endowment was $688 million as of June 30).
According to recent government data, HBCU endowments are a little more than half the size of median endowments at similar schools that are non-HBCUs.
After matching accredited HBCUs with non-HBCUs across key areas that include sector type (public, private, two- or four-year institutions), highest degree offered, enrollment size and location, the U.S. Government Accountability Office found the median endowment at HBCUs was $12 million, while the median endowment size at non-HBCUs was $23 million, according to a June report. GAO analyzed Department of Education data on the endowments of 83 HBCUs and 286 non-HBCUs to find the median endowment sizes.
The report, which examined HBCU's capital project needs and funding sources, ultimately recommended the Department of Education increase outreach to institutions to inform them of its HBCU Capital Financing Program, which was created in 1992 and provides grants that can be used for a number of purposes, including endowment-building, financial management, academic resources and physical infrastructure.
"Officials we spoke with noted that HBCUs do have smaller endowments, so many have challenges accessing financing," said Boston-based Melissa Emrey-Arras, a key contributor to the report and director of education issues on GAO's education, workforce and income security team, in a phone interview.
"What you see from (the report) is that HBCUs had about half of the total endowment (assets) of matched non-HBCUs," she continued.