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Endowment returns flat for universities

Published on NewsOK Modified: February 1, 2013 at 8:27 am •  Published: February 1, 2013

After two strong years, college and university endowments lost ground slightly during the fiscal year ending last June 30, with their investments declining 0.3 percent on average, according to a new study.

U.S. stock markets have risen around 10 percent since then, and many global markets are also higher, so recent performance is likely stronger.

Endowments are the assets owned and invested by universities, who typically spend about 4 to 5 percent of their values annually to support things like financial aid, faculty salaries and other expenses — and then try to replenish the payouts through fundraising and investment returns.

The survey of 831 schools, conducted by NACUBO, a university business officers group, and investment adviser Commonfund, found that at the average university, the endowment kicks in about 9 percent of the operating budget.

But the figure is higher at richer universities, averaging more than 16 percent at institutions with endowments of at least $1 billion. The endowment provides about one-third of the budget at Harvard, whose endowment of $30.4 billion is the largest of any university in the world — though still well off its peak of nearly $37 billion before the recession hit.

To beat inflation (higher for the goods and services colleges purchase than for the overall economy) and replenish payouts to support university spending, endowments have needed to return about 7.4 percent annually, said Verne Sedlacek, president and CEO of Commonfund.

Larger endowments, over $1 billion, have managed that, averaging 7.6 percent over the last decade, the survey found. But endowments under $100 million have returned on average less than 6 percent (the average return for all schools in the survey was 6.2 percent).

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