By Svea Herbst-Bayliss
BOSTON, March 5 (Reuters) - U.S. colleges and universities lost nearly one-quarter of their endowments' worth in the first half of their fiscal year, forcing them to cut staff and budgets just like corporations hurt by the financial crisis.
From July through December, U.S. schools' endowments dropped an average of 24.1 percent, according to a report released by the Commonfund Institute, a nonprofit group that polled 629 educational endowments on their results.
Illustrating just how severely the financial crisis is affecting higher education, even wealthy colleges like Harvard are freezing salaries, offering early retirement, reassessing construction projects and considering selling off art collections.
Smaller schools, with endowments of $10 million or less, fared even worse with their endowments losing 30.2 percent, according to the study which will be released on Thursday.
"These are the worst-ever half year results that educational endowments have seen," Commonfund Executive Director John Griswold said in an interview. "Even the most diversified endowments suffered serious declines."
Harvard University, the country's richest, reported in December that its endowment had shrunk by $8 billion to $29 billion in four months and that it expects that loss to widen to 30 percent by the end of the fiscal year on June 30, 2009.
Commonfund, which provides nonprofit organizations with investment information and professional development programs, traditionally reports on these numbers only once a year.
However, the group prepared this rare half-year study between January and February 2009 to assist investment committees in making changes to cope with extremely difficult market conditions. "Some people like the comfort of knowing they are not they are not alone," Griswold said.
Endowments have long provided an important lifeline for schools as these often use at least 5 percent a year to pay for salaries, maintain buildings and contribute to financial aid to help offset the considerable cost of attending private high schools and four year colleges.
Last year bets on U.S. equities dealt endowments the biggest blow. "It was the stock market," Griswold said, noting that the Standard & Poor's 500 index lost about 38 percent in 2008. Larger schools were able to navigate the market slightly better, the report said, noting that schools with endowments of $1 billion or more lost 21.7 percent.