Universities face tough times: Educational endowments returned -18.7% in 2009

Data gathered from American colleges and universities participating in the 2009 NACUBO-Commonfund Study of Endowments (NCSE) show that these institutions’ endowments returned an average of -18.7 percent (net of fees) for the 2009 fiscal year (July 1, 2008 – June 30, 2009). The average annual three-year return for institutions participating in the Study was -2.5 percent, while the average annual return for the trailing five years was 2.7 percent. Over the past 10 years, participating institutions reported an average annual return of 4.0 percent.

The data come from in-depth surveys of 842 U.S. institutions of higher learning, including public and private colleges and universities, their supporting foundations, and community colleges. Participating institutions represent $306 billion in endowment assets.

Study results show that investment returns were negative for all asset classes but two—fixed income, which generated a 3.0 percent gain, and short-term securities/cash, which returned 0.8 percent. International equities produced the weakest return, -27.6 percent. Domestic equities were not far behind, with a return of -25.5 percent on average. Alternative strategies returned -17.8 percent, while short-term securities/cash/other returned -1.5 percent.

NACUBO President and Chief Executive Officer John D. Walda and Commonfund Institute Executive Director John S. Griswold jointly said that FY2009’s total return confirms how difficult the year was for educational institutions. In mid-December, partial NCSE data gathered from 504 institutions showed the average return for FY2009 was -19.0 percent. “These results illustrate the extreme difficulties colleges and universities faced at the height of the global economic crisis,” said Walda. “Our hope is that the strong first half of FY2010 augurs well for the full fiscal year and that a year hence the story will be much more positive.” Griswold pointed out, “Many educational institutions have taken steps to adapt to the realities imposed by endowments that have been buffeted by losses averaging nearly 20 percent. Future NCSE reports may well reflect fairly significant changes in investment management, spending, debt practices and governance policies.

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