Endowments Returned 19.8% Last Year but Have Yet to Recover From 2008 Crisis

November 07, 2011

College and university endowments netted a sizable average gain of 19.8 percent in the 2011 fiscal year, but despite the growth, they will still not make up the ground lost in the 2008-9 credit crisis for years to come.

That's according to a preliminary report released on Monday by the National Association of College and University Business Officers and the Commonfund Institute. Endowments have turned the corner since 2009, when the average endowment returned minus 18.7 percent, the worst results on record for the decades-old annual survey. But endowments hold just 86 percent of their value from the 2007 fiscal year.

"We're still nowhere near where we need to be to recoup the losses from the downturn," said William F. Jarvis, managing director of the Commonfund Institute.

The report covers a fiscal year that for most colleges ended on June 30. Since then, the stock market has spun violently up and down for weeks in July and August, and the waves have hardly subsided. The impact on endowments of the latest volatility has yet to be measured.

In the report, the average returns are up from an average 12.6 percent in the last fiscal year, and ranged from 31.8 percent to 3.7 percent. The annual study collected data from 284 colleges and universities with endowments ranging from less than $25-million to more than $1-billion.

The institutions had an average endowment spending rate of 4.3 percent. In a joint statement, Nacubo and Commonfund executives said returns for five- and10-year periods were only 5 percent and 5.5 percent, respectively. Those percentages are "not significantly higher than the spending rate for many institutions," the statement said. "It will take several more years of positive returns for enowments to recover fully from the crisis."

The report does not reveal results for individual endowments, but several prominent universities have already disclosed that they hauled in big returns this past year. Columbia University's endowment netted a 23.6-percent return, which, coupled with gifts, brought its total asset value to $7.8-billion. Both Yale and Princeton Universities' endowments reported investment returns of 21.9 percent, which helped bring Yale’s endowment to $19.4-billion and Princeton’s to $17.1-billion. Harvard University's investments raked in a 21.4-percent gain, which helped raise its total asset value to $34-billion, still the largest in the country.

The study found that large and small endowments did nearly equally well, even though smaller ones tend to have smaller gains. Institutions with asset values less than $25-million had the largest average return, at 20.3 percent, while institutions with more than $1-billion endowments gained an average of 20.2 percent.

Domestic equities had the strongest returns for colleges. Institutions with endowments of more than $1-billion invested an average 12 percent in domestic equities, while endowments less than $25-million allocated an average 41 percent.

Nacubo and Commonfund will release the final report on 2011 endowment results early next year.

Correction (11/8, 12:55 p.m.): This article originally misstated the nature of the endowment gains recorded by Columbia, Harvard, Princeton, and Yale Universities. Each institution's endowment increase was due in part to gifts it received. The gains were not solely due to the endowments' appreciation in value. The article has been updated to reflect this correction.