Reversal of Fortune: The Effect of the Market Decline on the Budgets of Endowed Institutions

This paper describes the circumstances surrounding the accelerated rise of expenses at many institutions with large endowments during the unprecedented market rise of the 1990s, and the budgetary implications of the three-year decline in the equity markets, not seen since 1941. A section entitled “What to Do?” offers suggestions for dealing with the budgetary consequences of this decline.