College endowments posted annual returns that were up from the year before, when a rocky stock market — battered by over-the-top inflation and the beginning of the war in Ukraine — put a sharp dent in their value.
According to the annual NACUBO-Commonfund Study of Endowments, released today, college endowments had an average one-year return of 7.7 percent, net of fees, in the 2023 fiscal year. The year before, the endowments’ overall average return was minus 8 percent.
Although endowments both large and small saw positive results, returns for institutions with the smallest endowments were particularly robust. Endowments of under $50 million saw an average return of nearly 10 percent in the 2023 fiscal year, the highest among the seven size cohorts in the study. In comparison, institutions in the group with the largest endowments, more than $5 billion — which typically perform better than the endowments of their smaller peers — saw the lowest average one-year return, at 2.8 percent.
The difference in returns for the two groups boiled down to the asset allocation of their endowments. “Interestingly, small endowments — with their larger allocations to public equities — generally fared better performance-wise than their larger peers this year,” said Kara D. Freeman, president and chief executive of the National Association of College and University Business Officers, during a call with reporters. Publicly traded equities had the strongest returns during the 2023 fiscal year, while private equities — which were more likely to make up a sizable portion of the asset allocation of large endowments — lagged during the same period.
Colleges spent a total of $28.4 billion from their endowments last year, representing an average spending rate of 4.7 percent, rising from 4.0 percent the prior fiscal year.
Although returns were up, new gifts to endowments were down. They totaled $13.3 billion in the 2023 fiscal year, down from $14.9 billion a year earlier. The decline likely stemmed from fewer donor gifts at the close of the 2022 calendar year, which marked the halfway point of the fiscal year and the end of a brutal year for stocks.
The average size of endowments in the survey was $1.2 billion. However, the median endowment size was about $209.1 million; nearly a third of the endowments in the study were valued at $100 million or less.
The NACUBO-Commonfund study, in its 50th year, reflects responses from 688 colleges and education-related foundations with total endowment assets of $839.1 billion in the 2023 fiscal year, which ended on June 30 for most institutions.
Here are more highlights from the survey:
