Endowments Ahead 12.6% for FY 2010

November 3, 2010 (PLANSPONSOR.com) – Preliminary data from U.S. colleges and universities indicate that these institutions’ endowments returned an average of 12.6% for the 2010 fiscal year.

A news release said the data was gathered from 80 U.S. colleges and universities for the 2010 NACUBO-Commonfund Study of Endowments (NCSE) and that the showing compared with a return on the Standard & Poor’s 500 Index of 14.4% for the same period. Among this group, the highest return earned for FY2010 was 36.2% and the lowest was 4.8%.

The news release said that larger endowments have historically tended to outperform smaller ones. However this year’s sample shows institutions with assets under $25 million returning an average of 14.1% while those with assets over $1 billion realized an average return of 12.3%. The lowest average return, 11.3 %, has come from endowments with assets between $25 and $50 million.

A slightly smaller sample drawn from 64 institutions shows that trailing three-year returns averaged -3.4%; trailing five-year returns averaged 2.7%; and trailing 10-year returns averaged 3.2% (all net of fees).

“It appears that FY2010 will go down as a somewhat of an anomaly,” said a joint statement from NACUBO President and Chief Executive Officer John D. Walda and Commonfund Institute Executive Director John S. Griswold. “It is unusual to see smaller institutions outperforming larger ones, as happened in FY2009 and FY2010. But smaller institutions tend to have larger allocations to the traditional asset classes of domestic equities and fixed income, and these asset classes produced good returns over a period when equities rebounded strongly from the FY2009 sell-off and fixed income benefited from declining interest rates.  It remains to be seen whether this pattern will continue into future years.”

The FY2010 effective spending rate for the group of 64 institutions averaged 4.3%, little changed from the 4.4% average rate reported in FY2009. The median gift to endowments in FY2010 was $1.1 million. The average percentage of institutions’ operating budgets supported by annual giving was 6.2%.