$75,000 a Record Gift for Yale? Here's How
By STEPHANIE STROM
Published: June 01, 2004
Yale University will celebrate the largest class gift in its history this week when it credits the class of '54 with a contribution of more than $110 million.
The bulk of the gift, $90 million, comes from an unusual fund-raising exercise born 25 years ago out of $75,000 in seed money and frustration with the university's financial management.
''Savvy money management is taken for granted by most graduates of universities today, but it is a relatively new phenomenon,'' said Richard Gilder, a member of the class of '54. ''Yale does a great job of managing the endowment now, but back then its investment performance was pretty lousy.''
In 1979, Mr. Gilder and a group of his classmates were attending their 25th reunion and bemoaning the sorry state of Yale's finances, when Mr. Gilder proposed a novel idea: What if they pooled their donations and entrusted them to a professional money manager with a plan to turn the principal and the interest earned over to Yale at their 50th reunion?
Mr. Gilder, one of Wall Street's most famous money managers, has made and given away several fortunes in his lifetime. It was he who wrested the management of Central Park from the City of New York, which led to the park's renaissance. So few of his classmates balked at his suggestion.
Two years after the reunion, after receiving nonprofit status from the Internal Revenue Service, the 54/50 Fund was born. Some 40 members of the class of '54 seeded it with $75,000, and an additional 31 put in about $300,000 more -- no one can remember the precise amount -- on the occasion of the 30th reunion.
The fund performed better than expected, growing at a 37 percent compound annual rate of return on the original investment.
''We all thought it was a terrific idea when Dick proposed it, but we had no idea it would be so successful,'' said Donald K. Clifford Jr., known as Obie. ''We put in next to nothing and came out with millions.''
Mr. Clifford contributed $5,000 to the fund but was recently thanked by Yale for his contribution of $2,562,000. Joel Smilow, the current class secretary, put in $15,000 and was credited for a gift of $3,501,791. ''What's happened is beyond anyone's wildest dreams,'' Mr. Smilow said. (The alumni received tax deductions for their original donations only.)
The fund did not replace direct giving to the university. There is the Smilow Field House, courtesy of a gift from Mr. Smilow, and Johnson Field, an athletic field financed by another class member, Charles B. Johnson.
''This class has been incredibly loyal to the university, and the 54/50 Fund has perhaps encouraged that,'' said Christopher A. Forster, a class of '54 member.
Over the years, Yale tried numerous times to get the class to hand the gift over. ''They didn't like it because Yale didn't control it, but we held on to it anyway,'' Mr. Gilder said.
Five years ago, concerned that Yale was falling behind in the sciences and engineering, the university's president, Richard Levin, asked if the class would unleash some of the money early to back an expansion of Science Hill on campus and kick off a $500 million enhancement.
The class drove a hard bargain. The fund was then about $70 million, but its stewards figured it would continue to grow.
''We were giving up four years of income,'' Mr. Gilder said. ''So we told them we wanted a credit for a 10 percent annual compounded return for those years.''
Ultimately, the fund got credit for raising $90 million. The new $25 million Environmental Science Center bears the class of '54 name, as will a new $25 million chemistry building that is under construction.
The remaining $20 million went to a matching fund aimed at enticing class of '54 members to make donations to the class's 50th reunion gift. Last week, Mr. Smilow said the fund was almost depleted.
Almost as valuable as the donation, Dr. Levin said, has been the esprit de corps the fund has fostered. For that reason, he has encouraged recent classes to do something similar.
''Their interest in their investment fund actually brought the class of '54 closer to the university, I think, and that's never a bad thing,'' he said.