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How Independent Schools are Focused on Endowments and Fundraising in a More Competitive World

There have been many recent articles on the challenges that private colleges in the U.S. face including lower enrollments, higher costs and tuition increases. Many of these same trends are also impacting independent schools (K-12), which are an important part of our educational system. These trends in the independent school arena include (see Wilmington Trust Report for further discussion):

  1. Enrollments are flat or declining nationally
  2. Great pressure to build out campuses
  3. Rising tuition impacts affordability

Snapshot of Private Schools: Focus on New York

The National Association of Independent Schools (NAIS) has over 1,400 member schools (serving more than 562,000 students and 121,000 teachers and staff) and in the Northeast / Mid-Atlantic states, there are 777, with New York having 190 schools. According to the NAIS, these include boarding and day/boarding schools; elementary and secondary schools; boys’, girls’; and coeducational schools. There are various types of independent schools such as faith-based schools and secular schools. Many of the schools in New York State have long histories and are supported by a strong network of parents and alumni. According to Huff Post Politics, approximately 10% of students in the U.S. attend a preK-12 private school. (footnote from study)

Greater Importance of Endowments and Fundraising

Thus, schools are operating in a more competitive environment than in past decades. At the same time, fundraising and endowment management have become more important areas. Fundraising is taking on greater importance as schools expand their development teams and diversify their fundraising strategies to include major gifts, planned giving, and social media; annual funds are key sources of unrestricted funds. School endowments are of greater importance as they provide important financial resources annually to a school. Capital campaigns are also more common.

New York and California Compared

While the research focused on New York State, Wilmington Trust also provided comparative information on California, where there are 212 member schools (CAIS-California Association of Independent Schools). It is interesting to note the average size investment portfolios for New York and California at $21.2MM and $18.6MM, respectively. Some schools had investment portfolios of over $100MM. The annual fundraising data was also reflective of the increased importance of fundraising with both New York and California schools having over $3MM in annual average fundraising.

Summary Chart for Comparisons: New York Versus California

(Most recent Form 990s/K-12 Schools and High Schools)

  New York Private Schools California Private Schools
# of k-12 Schools/High Schools 88 60
Total AUM $1.67B $1.52B (all schools) / $1.1B (K-12/HS)
Average Investment Portfolio per school $21.2MM $18.6M
Average Annual Fundraising per school $3.2MM $3.8MM
Top 5 Portfolios   Top 5 Portfolios
#1: Brearley School $115.2MM #1: Thacher School: $125.6MM
#2: Chapin School $109.2MM #2: Harvard-Westlake: $102.8MM
#3: Robert College of Instanbul $84.1MM #3: Cate School: $81.8MM
4: Horace Mann $81.4MM #4: Polytechnic School: $61.6MM
#5: St. Bernard’s $79.1MM #5: Castilleja School: $49.9MM

Independent Schools Planning for 2015: Endowments and Fundraising go Hand in Hand

  • The current trends all point to a more important role for fundraising and endowment management. Both enhanced fundraising and investment management can help the investment portfolios grow.
  • Fund raising plans should be diversified and have major-gifts and planned giving components. Planned giving is an important way to increase the endowment.
  • Endowment strategies should target long term growth and should focus on asset allocation, portfolio risk and overall fees, which impact future returns.
Walter Dillingham-Managing Director and Business Development Officer  The preceding is a guest post by Walter J. Dillingham, Jr., managing director and business development officer in the Endowments and Foundations practice of Wilmington Trust, a national wealth management company whose offerings include personal trust, wealth planning, fiduciary, asset management, and family office services. You can read the full study including table here.
Topics: Nonprofit Leadership and Practice