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Educational endowments earned returns averaging -0.3 per cent in FY2012

Data gathered from 831 US colleges and universities for the 2012 NACUBO-Commonfund Study of Endowments (NCSE) show that these institutions’ endowments returned an average of -0.3 per cent (net of fees) for the 2012 fiscal year – a steep decline from the FY2011 average return of 19.2 per cent.

Over the longer  term, ten-year returns for FY2012 were 6.2 per cent compared with 5.6 per cent in FY2011,  suggesting that long-term performance for many institutions continues to improve. 

The data are broken down into six categories according to size of endowment, ranging from institutions with endowment assets under USD25m to those with assets in excess of USD1bn. These large endowments produced the highest FY2012 return, an average of 0.8 per cent. The other categories with positive returns were endowments with assets between USD501m and USD1bn, which reported an average return of 0.4 per cent, and endowments with assets under USD25 m, which reported an average return of 0.3 per cent. All three of the mid-sized cohorts reported negative returns, the lowest being -1.0 per cent among institutions with assets between USD51m and USD100m. Institutions with assets between USD101m and USD500m returned -0.7 per cent, while those with assets between USD25m and USD50m returned -0.5 per cent. 

This year’s data show that institutions’ trailing three-year returns averaged 10.2 per cent; trailing five-year returns averaged 1.1 per cent; and trailing 10-year returns averaged 6.2 per cent (all net of fees). Endowments with assets over USD1bn generated the highest average return for all periods. 

The annual NCSE analyses return data and a wide range of related information gathered from a broad cross section of US colleges and universities, both public and private, as well as their supporting foundations. The size and scope of the Study make it the most comprehensive annual report on the investment management and governance practices and policies of US institutions of higher education. Of the 831 institutions participating in the 2012 NCSE, 525 are private and 306 are public. The participating institutions represent USD406.1bn in total endowment assets. Ninety-four per cent of this year’s participating institutions also participated in last year’s study. 

Viewed by asset class, the data show that fixed  income investments generated the highest return, an average of 6.8 per cent, while  international equities produced the lowest return, -11.8 per cent. Domestic equities returned 2.0 per cent, alternative strategies as a group returned 0.5 per cent and short-term securities/cash/other returned 0.2 per cent. 

“This year’s data show the re-emergence of a number of long-term trends in the sector,” said NACUBO president and chief executive officer John D Walda and Commonfund Institute executive director John S Griswold in a joint statement. “Over the years, with the exception of periods such as the recent economic crisis, institutions with the largest endowments have reported the highest one-year returns. This trend can once again be seen in this year’s data, as well as data for trailing periods. We attribute this outperformance to a number of factors: well diversified portfolios with an equity bias, the ability to make long-term commitments  to less liquid strategies, access to top-tier investment managers, and greater resources,  including larger staffs, leading-edge technology and experienced investment committees.” 

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