Private School Endowments Return 7.4% in 2018

Size matters, as the larger funds outperformed the smaller ones.

Private school endowments in the US returned 7.4% on assets for fiscal year 2018, down from 11.8% the previous year, according to a study from Commonfund, an asset manager for non-profit organizations. 

The annual study of independent school endowment management practices was conducted by Commonfund in conjunction with the National Business Officers Association. A total of 223 schools representing approximately $12 billion in combined endowment assets provided data for the study.

The participating institutions are comprised of day schools, boarding schools, and schools that are a combination of the two. The schools are private, nonprofit institutions enrolling students from kindergarten through 12th grade. Approximately 10% of the student population in the US attends an independent school, according to the National Association of Independent Schools.

This year’s study found that trailing 10-year returns rose to an average of 5.5% net of fees from 5.2% the previous year. Meanwhile trailing five-year returns declined to an average of 7.3% from 7.9%, and average three-year returns rose to 6.2% from 4.4% a year ago.

“Just like we see with colleges and universities, independent schools are facing rising costs and limits on their ability to raise tuition,” said Cathleen Rittereiser, executive director of the Commonfund Institute. “Raising non-tuition sources of revenue is an imperative, maximizing the returns of their endowments is an important part of that strategy.”

Data gathered in the study was segmented into three size groups: institutions with endowment assets of more than $50 million; those with assets between $10 million and $50 million; and those with less than $10 million in assets.

The results from the study indicate that size matters for these endowments as the larger ones on average outperformed the smaller ones. Schools with assets over $50 million reported an average return of 8.2% in 2018, while those with assets between $10 million and $50 million reported a return of 7.4%, and those with less than $10 million in assets reported a 6.2% return.

Schools with assets over $50 million also reported the highest return for the three, five-, and 10-year time periods. Over the past 10 years, the largest schools reported an average return of 6.3%, while institutions with assets between $10 million and $50 million reported an average return of 5.5%, and those with assets under $10 million saw a 4.4% average return.

The asset allocations for private school endowments stayed relatively unchanged during fiscal year 2018, according to the study. Participating institutions reported having an average of 33% of their endowments invested in alternative strategies, down from 35% in 2017; 28% in US equities, down from 27% in 2017; 22% in non-US equities, up from 20% in 2017; 13% in fixed income, which is unchanged from the previous year; and 4% in short-term securities, cash, or “other,” down from 5% in 2017.

Within the 33% allocated to alternative strategies, marketable alternative strategies accounted for the largest sub-allocation, at 18%, followed by private equity, which accounted for 6%. Energy and natural resources accounted for a 3% allocation, and venture capital and private equity real estate (noncampus) were at 2% each, while commodities and managed futures and distressed debt accounted for 1% each.


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