America鈥檚 wealthiest business schools

In this Sunday, March 13, 2016, photo people walk near Memorial Church, behind, on the campus of Harvard University, in Cambridge, Mass. Amid scrutiny from Congress and campus activists, colleges across the country are under growing pressure to reveal the financial investments made using their endowments. (AP Photo/Steven Senne)

The most elusive yet revealing stat about a business school is the size of its endowment. Few schools disclose this number in any public way, though it鈥檚 fair to say that B-school deans put more focus on this one number than any other. After all, it鈥檚 the ultimate measure of a school鈥檚 true 鈥渨ealth.鈥

And a wealthy school is more likely to attract and retain the best faculty and staff. It鈥檚 no surprise that business schools with the largest budgets聽devote at least half of their expenses to salaries and benefits. A wealthier school is also more likely to have better facilities, in the form of new state-of-the-art buildings or well-maintained historic buildings with the latest technology. Wealthy schools typically have more flexibility to fight for the best students in the form of scholarship money, which in turn聽improves the overall profile of an incoming class and ultimately the career outcomes of its graduates.

In fact, the size of a school鈥檚 endowment is far more important an indicator of a school鈥檚 power and impact than an individual ranking,聽location, facilities, acceptance rate, career prospects, network strength, or industry placement. Because a聽business school鈥檚 wealth typically comes from gifts and other donations from its alumni network, a school鈥檚 wealth is a good indication of the strength of its alumni base. So which schools lead and which institutions聽have some catching up to do?


With painstaking research, Poets&Quants has produced the most complete and up-to-date list of business school endowments ever published, with more than 50 top schools sharing their latest data. (Only two top U.S. schools declined to provide this information: Notre Dame University鈥檚 Mendoza School of Business and the University of Pittsburgh鈥檚 Katz School). Not surprisingly, you鈥檒l find a strong correlation between endowment and the rankings, the quality of a class profile, and career statistics. But the numbers pull back the curtain on overvalued and undervalued programs and provide a potential explanation as to why certain schools are climbing the rankings every year while others stay put聽or lose ground.

It won鈥檛 shock anyone to know that Harvard Business School is at the top of the endowment heap. More surprising is its lead over all its rivals. As of fiscal 2015, ended June 30th, 2015, HBS鈥 treasure chest totaled a whopping $3.3 billion, the size of many university and college endowments.聽The gap between Harvard and Stanford University鈥檚 Graduate School of Business is now $2 billion, given the GSB鈥檚 current $1.3 billion endowment. In the past four years alone, HBS has increased its endowment by 24.5%, or $658 million, from $2.7 million in fiscal 2012, when the Great Recession walloped all endowments.

After the big two, you鈥檒l find a predictable set of schools at the top: the University of Pennsylvania鈥檚 Wharton School at $1.289 billion, Northwestern University鈥檚 Kellogg School of Management at $866.0 million, and MIT鈥檚 Sloan School of Management at $812.9 million. A big surprise is the endowment size of Yale University鈥檚 School of Management at $743.0 million, placing it sixth among the top business schools. And an equal surprise, in the other direction, might well be the University of Chicago鈥檚 Booth School of Business which has an endowment of $734.0 million.

The Chicago Booth number, however, does not include聽investment manager David Booth鈥檚 $300 million naming gift in 2008 which can yield more annual income than the cash thrown off by the Booth endowment. If the grant from Dimensional Fund Advisors鈥 Co-Founder David Booth were included, the Booth endowment could be double its actual size, putting it behind only Harvard (see table for complete list). Explains Joe Buck, associate dean for the office of advancement, 鈥淭he Booth gift is not part of our endowment because there was no transfer of assets. The gift is structured so that the school receives a cash flow each year based on the stock dividends of Dimensional Fund Advisors.鈥

It鈥檚 also fascinating to examine U.S. business school endowments compared to the funds raised by non-U.S. schools. INSEAD has the largest endowment of any of the top European schools, but at $206.6 million the size of that fund puts the institution just above the University of Wisconsin鈥檚 Business School and just behind Cornell University鈥檚 Johnson School. London Business School鈥檚 $65.2 million endowment places the school just above the University of Arizona鈥檚聽business school.

By and large, the spirit of university giving in Europe and other parts of the world lags far behind that of the U.S. At one business school after another, the endowments are significantly lower for schools that have risen to prominence in global rankings by The Financial Times and The Economist. IESE Business School in Spain has an endowment of $56 million, while IMD in Switzerland boasts just $24.6 million and ESADE in Spain of $4.7 million.


While the overall size of a school鈥檚 endowment is important, the size of the institution also matters. Larger programs have larger networks but they also require higher expenses and greater investments to stay on par with smaller rivals. That鈥檚 why we are examining the numbers not merely by overall endowment but also by endowment per student. We are ranking them by endowment and by endowment per student.

Looking at the numbers per student,聽Harvard may still rule the roost but things get switched up fast when accounting for the size of a school鈥檚 enrollment including undergraduate, graduate and doctoral programs. Harvard has nearly $1.7 million in endowment funds for each enrollment student, compared with No. 2 Stanford which sits at $1.0 million. Yale SOM is third with $968,709 per student, while Dartmouth Tuck is fourth with $585,538 per student, and Vanderbilt University鈥檚 Owen School is fifth with $527,915 per student. The highest public university is Virginia鈥檚 Darden School which has an endowment per student of $526,291, placing it sixth overall (see table here).


How does an endowment work? It鈥檚 like a treasure chest that throws off cash each year to cover part of a school鈥檚 operating costs. No school uses its endowment as a checking account, but rather as savings that throw off some cash each year while preserving the base capital of the fund. At Harvard Business School, for example,聽the targeted annual payout goal is between 5% and 5.5% of the total $3.3 billion endowment. So in 2015, when the payout was 5.1% of the endowment, this treasure chest produced $127 million, accounting for 18% of the school鈥檚 total revenues. The year-over-year increase in Harvard鈥檚 endowment聽from $3.2 billion a year earlier reflects a 5.8% net appreciation in the endowment鈥檚 market value, the subtraction of the year鈥檚 distribution of $127 million, offset by $69 million in endowment gifts received by HBS during the year.

How much a school taps into its endowment for cash is dependent on university guidelines, the market appreciation or depreciation of the funds, as well as a school鈥檚 needs. In 2015, HBS鈥 endowment took a hit on the appreciation side, with the market value of the fund increasing by only 5.8%, versus the 15.4% rise of a year earlier. But the $69 million increase in endowment gifts also was just part of the $166 million in gifts and pledges to Harvard Business School last year.

Ultimately, the size of a school鈥檚 endowment amplifies its ability to carry out its mission and to enable and support growth and development for the school and its community.

Daniel J. Bonsoms, a CFA, is undecided on which MBA offer he will ultimately accept. He鈥檚 worked in private equity for the past four years and currently lives in Los Angeles.

America’s Wealthiest Business Schools

It’s no surprise that Harvard Business School tops this newest list compiled by Poets&Quants. Among the big surprises is the lead HBS now has over its rivals, Yale’s School of Management having the sixth largest endowment, as well as Babson College鈥檚 sizable treasure chest that places it ahead of such schools as Dartmouth, USC and Berkeley

Leave a Reply

Your email address will not be published. Required fields are marked *