An increasing number of independent pre-k through 12th-grade schools reported outsourcing their investment management to outsourced CIO providers, Commonfund reported in its “Commonfund Benchmarks Study of Independent Schools,” which tracks performance and trends of these institutions’ endowments.
Approximately 46% of institutions surveyed by Commonfund reported using an OCIO in the 2024 fiscal year, up from 33% in fiscal 2023. Of those endowments that outsourced assets, an average of 98.5% of assets were outsourced.
Approximately 26% of endowments with less than $10 million outsourced the investment management of their assets. Approximately 59% of endowments that reported having between $10 million and $50 million in assets outsourced, and 43% of endowments with more than $50 million in assets outsourced.
Commonfund conducted the study of independent school endowments alongside the Business Leadership of Independent Schools.
Returns and Asset Allocation
Per Commonfund, independent schools’ endowments returned an average 12.3% in the 2024 fiscal year. Over the past five, 10, 15 and 20 years, these institutions returned an annualized 7.7%, 6.7%, 8.0% and 6.9%, respectively.
These institutions allocated 35% of their portfolios to equities, 30% to alternative investments, 17% to non-U.S. equities, 14% to fixed income and 4% to short-term securities, cash and other assets.
Similar to university endowments, for which performance was tracked in a previous Commonfund study, larger endowments underperformed smaller ones in the 2024 fiscal year. They also allocated a larger percentage of their portfolios to private investments.
Endowments with less than $10 million in assets reported an average 1% allocation to alternative strategies. For endowments with $10 million to $50 million, they allocated 11% on average to these strategies. Endowments with more than $50 million in assets reported an average 34% allocation to alternatives.
The cohort of endowments with less than $10 million in assets also reported the highest returns: an average of 13.5%. Endowments with $10 million to $50 million reported average returns of 12.0%, while those with at least $50 million also reported 12.0% returns.
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Tags: Commonfund, OCIO, Outsource CIO