Report Shows Small University Endowments Outperform

Preliminary data from 80 colleges and universities gathered for the NACUBO-Commonfund Study of Endowments to be released in January shows that broad gains in the stock market last year helped college asset pools earn their first positive investment return in three years, with the smallest endowments performing better than the largest ones.

(November 3, 2010) — College endowments have returned an average of 12.6% in fiscal 2010 with the smallest university funds outperforming their larger counterparts, according to a joint NACUBO-Commonfund Institute report.

The findings from the NACUBO-Commonfund Study of Endowments have revealed that institutions with less than $25 million in assets — generally more heavily invested in traditional assets, such as domestic equities and fixed-income — returned an average 14.1%, compared to the 12.3% average return for those with more than $1 billion in assets for the fiscal year, which ended June 30.

According to the report, endowments with assets from $101 million to $500 million returned an average 13.8%, while endowments with $25 million to $50 million returned 11.3%. Overall, endowments returned an average 12.6% for the year ended June 30, an increase from the average -18.7% return a year earlier. Meanwhile, three-year returns averaged -3.4%; five-year returns, 2.7%; and 10-year returns, 3.2%; the returns are annualized and for periods ended June 30.

Despite the rebound, endowments on average failed to beat the stock market. The Standard & Poor’s 500 Index rose 14.4% in the same 12-month period, ended June 30, outperforming university invest funds, which generally hold a mix of stocks, bonds, hedge funds, real estate, and more complex investments. Many funds do not appear to have erased the losses they suffered during the recession.

While the 80 schools in the preliminary round of the endowment study had returns ranging from 4.8% to 36.2%, the full study, to be released in January, will include more than 800 institutions.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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