Data gathered from eight hundred and twenty-three American colleges and universities show that their endowments returned an average of 19.2 percent during the fiscal year that ended June 30, 2011, a marked improvement over the average 11.9 percent return reported for fiscal year 2010 and a continuation of the recovery from the -18.7 percent return reported for 2009, 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 in all asset classes in fiscal year 2011, including private equity real estate (non-campus), which was the only asset class with a negative return in 2010. As was true last year, domestic equities, which gained 30.1 percent, was the best-performing asset class, followed by international equities (27.2 percent), alternative strategies (14.1 percent), fixed income (6.5 percent), and short-term securities and cash (0.5 percent). The study also found that average three-year return for participating institutions was 3.1 percent, up significantly from the FY 2010 three-year return of - 4.2 percent, while the corresponding five-year return was 4.7 percent, up from 3 percent in FY 2010. Over the past decade, participating institutions have realized an annual average return of 5.6 percent.
In previous studies, larger endowments tended to significantly outperform smaller ones, but in FY2010 the return spread across six categories (from less than $25 million to those in excess of $1 billion) was only 60 basis points. In contrast, in FY2011 the spread expanded to 250 basis points. As was true in FY10, the highest average return (20.1 percent) was registered by institutions with assets exceeding $1 billion, while the lowest (17.6 percent) came from those with assets below $25 million.
"With average returns close to 20 percent and all six size cohorts reporting strong returns, the fiscal year was highly positive for educational endowments participating in the study," said NACUBO president and CEO John D. Walda and Commonfund Institute executive director John S. Griswold in a joint statement. "However, we should note that fiscal 2011 closed before equity markets encountered headwinds, with high volatility beginning in July 2011 caused by concerns about the debt crisis in Europe, the stubbornly high U.S. unemployment rate, and much slower growth in the U.S. economy. Endowments very certainly were stressed by these factors during the latter part of calendar year 2011."