The endowments of eight hundred and fifty American colleges and universities returned an average of 11.9 percent during the fiscal year that ended July 1, 2010 — a sharp improvement over the average -18.7 percent return reported in the FY09 study, a new report from the Commonfund Institute finds.
Conducted in partnership with the National Association of College and University Business Officers, the annual NACUBO-Commonfund Study of Endowments (NCSE) found that returns were positive for all major asset classes in FY2010 except real estate, with the highest return generated by domestic equities (15.6 percent), followed by fixed income (12.2 percent), international equities (11.6 percent), alternative strategies (7.5 percent), and short-term securities/cash/other (2.7 percent); last year only fixed income showed a positive return. The average three-year return for participating institutions improved to -4.2 percent, while the corresponding five-year figure was 3.0 percent. Over the past decade, participating institutions have realized an annual average return of 3.4 percent.
The study also found that the average spending rate for participating institutions was 4.5 percent, a slight improvement over the FY09 figure of 4.4 percent, and that, on average, 10.5 percent of participants' operating budget was funded from endowment, down from 13.4 percent in FY09.
In a joint statement, NACUBO president and CEO John D. Walda and Commonfund Institute executive director John S. Griswold said that the 3,060 basis-point increase was a welcome development for the nation's higher education community. "After a strong first half of FY2011, we are hopeful that good results in FY2010 can be repeated for the current fiscal year and thus return endowments to the solid footing needed to support the long-term missions of the institutions they support. The cautionary note is that three-, five-, and ten-year returns remained below the level needed to fund missions for the long term after accounting for spending, inflation, and expenses."