America’s wealthiest universities are venturing into Africa’s fast-growing markets seeking big returns on investments that will allow them to offer scholarships, lure leading professors and fund research, according to a report in msnmoney.
American university endowments – permanent funds of educational institutions – pride themselves on spotting new investment opportunities early, such as venture capital, private equity and natural resources such as timber. Combined, they manage assets of over $400 billion, the report says.
A study of 831 endowments by the Commonfund Institute and the National Association of College and University Business Officers published this year showed their annual net returns in 10 years ending June 30, 2012, averaged 6.2 percent.
By comparison, in the same 10-year period, returns for the U.S. S&P 500 stock index were 5.3 percent.
Africa’s growth, consumer spending, improved governance and disposable wealth all tell positive stories, said William McLean, who manages Northwestern University’s $7 billion endowment, according to msnmoney.
Northwestern is investing in Nigeria and Kenya among others, recently doubling its exposure to Africa.
“Our motivations are making some money,” McLean told Reuters in a phone interview. “You have to look everywhere for growth.”
University of Texas Management Company oversees investments for the University of Texas and Texas A&M Systems with assets of around $25 billion. It made two commitments to Africa through the private equity firms Helios and Actis, the report said.
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Besides Northwestern and the University of Texas, which rank among the 10 biggest U.S. endowments, other large schools investing in Africa include the University of Michigan, the University of Notre Dame and the University of Wisconsin. Between them they manage around $50 billion.
Rockefeller University with around $1.7 billion in assets expects to invest in Africa this year, according to msnmoney.
Africa accounts for about 2 percent of Notre Dame’s $8 billion endowment, and this could grow to 4 or 5 percent in the next five years, said chief investment officer Scott Malpass in the report.
Harvard University’s $31 billion endowment is the biggest in the U.S., and it has been exploring investments in Africa, the msnmoney report said.
Harvard had investments of about $198 million in sub-Saharan Africa representing 0.5 percent of its total investments, according to Harvard’s tax filings for the year ending June 30.
Universities’ interest in Africa represents a new class of investor with “unlimited time horizons, in contrast to the speculative hot money that poured into the region before 2008 only to vanish when the global financial crisis hit,” the report says.
Investment money from university endowments is “patient capital,” said Razia Khan, head of Africa research at Standard Chartered, in the msnmoney report.