The effects of higher education endowment management practices on endowment

Robert Louie Stanton McElhaney


The purpose of this study was to identify college and university endowments valued from $100 million to $1 billion and to determine the relationship between the five-year investment performance and selected endowment management practices. Data on the five-year investment performance and endowment management practices were obtained by the use of a survey instrument. The survey instrument was sent to 293 colleges and universities. Usable responses were received from 56 institutions. The 56 participants provided data on endowment performance, endowment governance, investment policies, investment managers, and investment manager selection practices. To determine the endowment management practices that would best explain the relationship between endowment performance and the endowment management practices of the 56 participating institutions, a stepwise regression equation was developed. The final regression model determined that two of the 18 endowment management practices provided the best explanation of the relationship. These two variables explained 20.6% of the variability of investment performance. The variable, importance placed on investment performance in selecting external investment managers, explained 11.4% of the variance; the variable, number of external investment managers per $100 million of assets, explained 9.2%. Therefore, the study concluded that the five-year investment performance of the 56 participating institutions' endowments decreased as the importance placed on investment performance in selecting investment managers and the number of investment managers hired increased.