The endowments of more than eight hundred American colleges and universities returned an average of -18.7 percent (net of fees) during fiscal year 2009, which ran from July 1, 2008 to June 30, 2009, a new report from the Commonfund Institute finds.
Conducted in partnership with the National Association of College and University Business Officers, the first-annual NACUBO-Commonfund Study of Endowments (NCSE) found that the average annual three-year return for participating institutions was -2.5 percent, while the average annual return for the trailing five years was 2.7 percent. Over the past decade, participating institutions reported an average annual return of 4 percent.
According to the study, investment returns were negative for all but two asset classes — fixed income, which generated a 3 percent gain, and short-term securities/cash, which returned 0.8 percent. International equities produced the weakest return (-27.6 percent), with domestic equities not far behind (-25.5 percent). Returns for alternative strategies
(-17.8 percent) and short-term securities/cash/other (-1.5 percent) were also negative.
The average spending rate for educational endowments participating in the study was 4.4 percent, with the highest rate (4.9 percent) found among institutions with assets between $501 million and $1 billion and the lowest rate (3.9 percent) recorded by institutions with less than $25 million in assets. The report also found that while 43 percent of respondents increased their spending rate, 54 percent increased their spending in dollars, indicating that colleges and universities stepped up their spending from other revenue streams to maintain programs and services central to their missions even as their endowments lost value.
"Many educational institutions have taken steps to adapt to the realities imposed by endowments that have been buffeted by losses averaging nearly 20 percent," said Commonfund Institute executive director John Griswold. "Future NCSE reports may well reflect fairly significant changes in investment management, spending, debt practices, and governance policies."