As Harvard's endowment abandons fossil fuels, oil-rich University of Texas catches up

Harvard University's endowment, currently valued at a jaw-dropping $50.9 billion, has been the largest among academic institutions for more than 35 years. But the University of Texas is nipping at its heels. The University of Texas hopes to regain the top spot it relinquished to Harvard in 1986. According to new data, it now has a $42.3 billion endowment, thanks in part to royalties it makes from oil and natural gas. The university owns more than 2 million acres of land in West Texas. "It's about three times the size of Rhode Island," says Ray Perryman, an economic consultant based in Waco, Texas. "It's a very big expanse of land."

"Production has gone up significantly in recent years, and as a result, the lands are now able to literally generate hundreds of millions of dollars a year in endowment for the university systems," Perryman says. The University of Texas and Texas A&M split the proceeds. That income was a ballast during a recent difficult period, when the stock market sank by more than 10%. According to the consulting firm Cambridge Associates, in fiscal year 2022, academic endowments had the lowest median return since fiscal year 2009. In recent years, endowments have been investing heavily in riskier assets, including private equity and venture capital funds, hoping to maximize their returns. After Russia launched its invasion of Ukraine, oil prices spiked to more than $120 per barrel. "In a lot of ways, the University of Texas is more like a sovereign wealth fund for a place like Norway," says Charlie Eaton, a sociology professor at the University of California, Merced who studies college endowments.