The endowments of four hundred and twenty-six U.S. colleges and universities returned an average of 15.8 percent, net of fees, for the fiscal year that ended June 30, 2014, up significantly from the 11.7 percent average return the previous year, a report from the Commonfund Institute finds.
Preliminary data for the 2014 NACUBO-Commonfund Study of Endowments, which is conducted in partnership with the National Association of College and University Business Officers, suggest that endowments in excess of $1 billion reported an average return of 16.8 percent, while those with assets between $501 million and $1 billion returned 16.2 percent. Smaller endowments were not far behind, as those under $25 million returned an average of 16.1 percent, while returns from those in three other cohorts fell into a range of 15.3 percent to 15.6 percent.
According to preliminary data, no asset class, strategy, or sub-asset class/strategy had a negative return in FY2014; indeed, every single asset class increased its returns. Based on preliminary data, the report also found that colleges and universities are continuing to increase allocations to alternative strategies (which include marketable alternatives, private equity, venture capital, natural resources, distressed debt, and private equity real estate), with the allocation to that asset class increasing to 58 percent, on average, among early reporting institutions and to 65 percent among institutions with assets of more than $1 billion. Last year, alternative strategies accounted for 53 percent of allocations on average.
"With only a few exceptions, higher relative performance by the largest endowments is in keeping with the findings of our studies over more than a decade," said Commonfund Institute executive director John S. Griswold. "Smaller endowments, which typically have the largest allocations to traditional asset classes, benefited from the strong performance of liquid domestic and international equities beginning in 2009. But the greater diversification practiced by the largest endowments and their emphasis on a variety of sources of return, both public and private, tends to result in higher long-term investment performance."