Endowments Just Starting to Recover

February 3, 2012 (PLANSPONSOR.com) - Data gathered from 823 U.S. colleges and universities for the 2011 NACUBO-Commonfund Study of Endowments (NCSE) show these institutions’ endowments returned an average of 19.2% (net of fees) for the 2011 fiscal year (July 1, 2010 – June 30, 2011).

This represents a marked improvement over the average 11.9% return reported for FY2010 and a continuation of the recovery from the -18.7% return reported for FY2009, when the financial crisis and accompanying slide in equity markets negatively affected educational endowments. Over the medium term, however, returns were still below the average inflation-adjusted spending rates of educational institutions, indicating that the damage inflicted by the downturn is still being felt by endowments.  

“Even though we had a really great year, many institutions are still not recovered from the recession; 47% have endowment market values below what was reported in 2008. Endowments are just starting to make up now for losses experienced in 2008/09,” said NACUBO President and Chief Executive Officer John D. Walda, at a press conference.  

According to the study, the average annual three-year return for participating institutions was 3.1%, a welcome rebound from the FY2010 three-year return of -4.2%. The corresponding five-year return figure was 4.7%, up from 3.0% in FY2010, while the average annual return over 10 years rose to 5.6% from 3.4% a year ago.  

“Over the last three years, returns have not kept up with the spending of institutions,” Walda noted. “They need to generate somewhere between 8% and 9% in returns to keep even with the average annual 4.6% effective spending rate of these educational institutions and inflation.”