The endowments of eighty U.S. colleges and universities returned an average of 12.6 percent (net of fees) in the fiscal year that ended June 30, 2010, a new report from the Commonfund Institute finds.
Conducted in partnership with the National Association of College and University Business Officers, the 2010 NACUBO-Commonfund Study of Endowments found that the highest-performing endowment in FY2010 returned 36.2 percent, while the lowest returned 4.8 percent. An analysis of a slightly smaller sample of sixty-four institutions found that the trailing three-year return averaged -3.4 percent; trailing five-year returns averaged 2.7 percent; and trailing ten-year returns averaged 3.2 percent, all net of fees.
Historically, larger endowments tend to outperform smaller ones, but preliminary data showed that institutions with assets of less than $25 million returned an average of 14.1 percent, while those with assets of more than $1 billion realized an average return of 12.3 percent. Mid-range endowments — those with assets between $101 million and $500 million — reported an average return of 13.8 percent.
"It appears that FY2010 will go down as somewhat of an anomaly," said NACUBO president and CEO John D. Walda and Commonfund Institute executive director John S. Griswold in a joint statement. "It is unusual to see smaller institutions outperforming larger ones, as happened in FY2009 and FY2010. But smaller institutions tend to have larger allocations to the traditional asset classes of domestic equities and fixed income, and these asset classes produced good returns over a period when equities rebounded strongly from the FY2009 sell-off and fixed income benefited from declining interest rates. It remains to be seen whether this pattern will continue into future years."