College endowments surge in value
College and university endowments prospered during fiscal 2011, but despite impressive gains, institutions still have a lot of ground to make up, thanks to the disastrous 2008-2009 market meltdown.
The preliminary endowment score card was released Monday by the Commonfund Institute and the National Association of College and University Business Officers. According to investment figures collected from 284 colleges and universities, the typical endowment generated an average return of 19.8% after fees were deducted. The returns ranged from a high of 31.8% to a low of 3.7% from July 1, 2010 to June 30, 2011.
It's not all good news
"What stands out among the preliminary figures is the fact that, despite the positive returns of this year and last, endowments still have not completely recovered from the damage inflicted by the market declines that accompanied the 2008-09 credit crisis," the organizations noted in a joint statement. "It will take several more years of positive returns for endowments to recover fully from the crisis."
The average college endowment is only at 86% of its 2007 fiscal year value.
Long-term endowment results
The longer-term results don't look nearly as sunny. The five- and 10-year averages for endowments are five percent and 5.5% respectively. The typical endowment spending rate is 4.3%. And, of course, the new report doesn't include the more recent volatile market returns.
Traditionally, larger endowments have outpaced modest ones, but this year the spread was small. Institutions with endowment values in excess of $1 billion returned 20.2% on average versus 19.1% for endowments under $25 million. Mid-range endowments, worth between $101 million and $500 million, averaged 19.9% returns.
While performance was similar, how investment managers generated their returns differed significantly. Endowments over $1 billion, for instance, devoted just 12% of their assets to equities versus 41% for the smallest endowments. The biggest endowments sunk 58% of their assets into alternative strategies versus nine percent for the smallest endowments.
Results for top universities
The preliminary report did not reveal results for individual endowments, but some of the alpha dogs have recently released their 2011 fiscal year results. Princeton and Yale, for instance, both produced returns of 21.9%. Harvard's endowment generated a 21.4% return, which boosted its value to $32 billion.
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