Returns on Educational Endowments Improved in FY2013, Study Finds

Returns on Educational Endowments Improved in FY2013, Study Finds

The endowments of 835 U.S. colleges and universities returned an average of 11.7 percent, net of fees, in the fiscal year that ended June 30, 2013, up significantly from the previous year's return of -0.3 percent, a report from the and the finds.

According to the , educational endowments of various sizes averaged similar rates of return, ranging from 11.4 percent for institutions with assets between $25 million and $50 million to 12 percent for those with assets between $501 million and $1 billion. By comparison, average returns by endowment size varied widely in FY2012, from -1.0 percent to 0.8 percent. As for longer-term trends, the smallest endowments, those with assets under $25 million, averaged the highest returns over three (10.6 percent) and five (4.9 percent) years, while the largest endowments, those with assets of more than $1 billion, recorded the highest returns over ten years (8.3 percent).

In terms of asset class, domestic equities generated the highest average return, 20.6 percent, in FY2013, followed by international equities (14.6 percent), alternative strategies (8.3 percent), fixed-income investments (1.7 percent), and short-term securities, cash, and other investments (1.2 percent). The survey also found that allocations to alternative strategies remained relatively stable at 53 percent, down just 1 percentage point from the previous year, while several large institutions significantly increased their allocations to private equity.

"The strong overall performance by endowments is encouraging at a time when the global economy continues its relatively slow recovery from the economic crisis of five years ago," said Commonfund Institute executive director John S. Griswold. "This year's investment results reflect in large measure the strength in publicly traded equities that has prevailed since early 2009. While larger endowments have performed better over the longer-term ten-year period, smaller endowments with higher allocations to domestic equities have done well in the shorter term — a result that has enabled them to continue to support their educational missions."

"Educational Endowments’ Investment Returns Averaged 11.7% in FY2013; Strong Improvement Over FY2012’s -0.3%." Commonfund Institute and National Association of College and University Business Officers Press Release 01/28/2014.