LSE looks to boost endowment fund to £1bn

The London School of Economics aims to increase the size of its endowment fund to £1bn, which would make it one of the best resourced institutions in the UK and bolster its position in global higher education.

Lord Myners, chairman of the LSE’s council and court of governors, told the Financial Times a plan was in motion to identify wealthy alumni and philanthropists and to make year-round use of its prime central London facilities in an effort to boost its £113m fund.

Despite sending more of its graduates to London’s leading investment banks and financial institutions than any other university in the UK, the LSE has lagged behind other University of London colleges and Oxbridge in terms of endowment and finances, and is light years away from leading US institutions, even though it competes with all of them for students and staff.

“We live hand to mouth,” said Lord Myners, 67. “I think £1bn would be a nice figure to have.”

He would not predict when this figure might be reached but added that a “couple of very large donations” would make a difference quickly. The LSE had a target surplus of about 5 per cent of its £300m annual revenue, he said, which was too small to build up significant capital to bolster the endowment.

“To build the endowment requires you not to use the money immediately, and I speak here as a former chairman of the Tate,” he said. “Whenever we tried to build an endowment, some blasted British duke decided to sell a Rubens that his family had owned for 300 years and we felt we had to try to buy it.”

The LSE had similar pressures to spend its capital, he said, but its real estate and academic reputation meant the goal was achievable if the school boosted its fundraising efforts.

The LSE is counting on Lord Myners’ reputation as a money man and fixer: he led the review of governance at the Co-operative Group after its bank made a string of disastrous decisions and was City minister in Gordon Brown’s government when it rescued RBS and Lloyds.

With a vastly larger endowment the LSE would have the clout to compete with other institutions in the increasingly tough environment in the elite higher education sector.

Lord Myners — who combines his posts at the LSE with work at a number of investment funds and at Edelman, the PR company — referred to the financial cushion that the Guardian Media Group, which he chaired for eight years from 2000, has with its £1bn endowment, allowing the news organisation to lose millions each year and stay in business.

However, he said there were no plans for a rapid expansion of the LSE’s student population. Although numbers would increase to about 12,000 from 10,000 today, the rise would only come about once the school had the facilities to accommodate them, he said.

“We want to keep it small. I think there is a certain intimacy that comes with that and also the emphasis on research or the emphasis on postgraduates is more consistent — we think — with scale. We are also landlocked, so you make a virtue of a necessity.”

Lord Myners also insisted the search for money would not come at the expense of the LSE’s academic reputation. He pointed to the launch of the LSE’s new philanthropy institute, financed by the hedge fund manager Paul Marshall.

We live hand to mouth. I think £1bn would be a nice figure to have

Although the institute was created to improve the effectiveness of “private contributions to the public good”, Lord Myners says rich donors such as Mr Marshall — who will have an advisory role within the institute — would not be allowed to dictate the school’s research agenda.

“You can’t buy your way into the LSE. You can buy your way into American universities and it would just be a mortal act if we ever crossed that line.”

Lord Myners said he relished his anonymity among the students and talked of going incognito to the Garrick restaurant, around the corner from the LSE’s main campus, to speak with them.

“I go and introduce myself — ‘I’m the chairman of the council’. Some of them say, ‘Camden’ or ‘Lambeth’? And I say, no, the school council. When [I have] convinced them that I am who I am rather than some itinerant elderly guy who has wandered in off the street, they invariably tell me the library is not big enough, the speed of IT communication could be faster, et cetera. It’s very satisfying.”