Poor Endowment Results in 2012 Are Blamed on European Debt Crisis

October 25, 2012

Even as stock markets in the United States have climbed steadily in the past year, investment returns for college endowments slipped in many cases, declining by an average of 0.3 percent, according to early results, announced on Thursday, of an annual survey.

The survey results were reported by the National Association of College and University Business Officers and the Commonfund Institute, the research arm of an investment firm that serves nonprofit institutions and pension funds. The data represent the endowment returns of 463 American colleges and universities in the 2012 fiscal year, which for most institutions ended on June 30.

The statistics reflect a little more than half of the institutions that are expected to share their information, but Thursday's report contains only institutional averages, not college-by-college results. Final results of the survey, due in January, will provide data on hundreds of individual college endowments.

The negative average return is a big reversal from the previous year, when the data showed a 19-percent increase in endowment returns.

The subpar performance largely reflects the downturns in foreign markets and the European debt crisis, said John S. Griswold, executive director of the Commonfund Institute.

While the major American stock indexes, such as Standard and Poor's, increased by roughly 5 percent or more during the 2012 fiscal year, European and developing markets fell by double digits, Mr. Griswold said.

Kenneth E. Redd, director of policy research and analysis at the association of business officers, said many college endowments had a relatively large share of their money, 10 percent to 15 percent, in foreign and emerging markets. Although those kinds of investments can provide more growth over the long term, there can also be more volatility.

While the long view may still be good for foreign and developing markets, Mr. Redd said, the downturn in 2012 means colleges will be slightly more strapped for short-term expenditures, such as student aid.