ADAPT: A Higher Education Playbook for Times of Crisis

Opinions expressed in AGB blogs are those of the authors and not necessarily those of the institutions that employ them or of AGB.

Higher education institutions have faced a barrage of disruptions over the recent years: a global pandemic, inflationary pressures, macroeconomic uncertainty, geopolitical and trade tensions, and policy uncertainty stemming from our nation’s capital.

These disruptions have had a direct impact on organizational strategy, and now even on the right approach for the management of long-term endowment portfolios.

These unprecedented market dynamics are prompting many endowment fiduciaries to revisit long-held assumptions and reassess key elements of their investment strategy. The challenge is particularly acute for the largest institutions, many of which hold significant illiquid allocations to private markets while simultaneously contending with potential cuts to their universities’ sources of funding and increases in investment excise taxes.

A near-constant state of strategic tension can make decision-making feel crisis-driven, especially when outcomes are often asymmetric, with significant long-term implications for portfolio resilience.

What are some lessons from previous times of crises, and how can institutions adapt to today’s set of crises?

Reflections on Past and Present Challenges

Current challenges for fiduciaries managing higher education endowment portfolios center on heightened uncertainty across markets, heightened volatility in asset prices, and unprecedented funding squeezes for the organizations these endowments support. Some federal policy changes have also led many large research universities to implement hiring freezes, pause salary increases, and suspend capital projects, while others have gone so far as to reduce employee headcount. These factors, coupled with the longer-term “demographic cliff” nationally, are creating the conditions for a significant crisis across higher education in the United States.

While each crisis is unique, addressing any crisis requires discipline, communication, and engagement, both within your community and across the sector more broadly. For example, recent changes to government policy have created a squeeze in federal research funding. The funding challenges are often complicated by drawn-out and uncertain negotiations with sponsored research agencies. To navigate through these crises, it is extremely important for higher education leaders to keep abreast of sector-wide policy changes.

Most schools engaged in crisis management at the onset of COVID-19; they performed stress tests and scenario analyses, examining a variety of options with every new bit of information and path forward for the pandemic. Many schools are reviving their contingency planning framework to advance through the current crisis.

Involving the right people in these initiatives is critical. Even from our view as investment advisors, the best-prepared institutions that work with us involve a broad swath of organizational leadership from finance, budget, legal, human resources, facilities, development, and admissions, as well as relevant academic departments. Depending on the nature of the crisis, you may enlist others at your organization.

For those institutions with affiliated foundations, keep foundation leaders informed and engaged to review the relevant factors of the crisis for your institution, whether around diversity, equity, and inclusion (DEI); sponsored research; human resources practices; and, of course, financial management and liquidity needs.

Prioritizing Action in a Crisis: An ADAPT Framework

Learn more in our latest paper where we delve into our ADAPT framework: