After two years of impressive growth, college endowment investment return rates fell in 2015 to 2.4 percent from 15.5 percent the previous year. While some institutions should still be feeling pretty flush, the average rate of return among colleges and universities participating in the annual survey conducted by Commonfund and the National Association of College and University Business Officers (NACUBO) was the lowest since the -0.3 percent reported for FY 2012.
The 812 institutions in this year’s study represented $529.0 billion in endowment assets. Although the average endowment was about $651.5 million, more than half of the study participants had endowments coming in below $115 million.
And why do we care?
The college “endowment” is basically the total value of an institution’s investments—property, stocks, and cash. It mostly comes from donations from rich alums and others, but grows with wise management.
Usually colleges use the interest from their endowments to cover worthy expenses like scholarships for students. A college with a huge endowment may be less concerned about getting 100% of tuition from every student and can afford to repair buildings or buy new technology.
“FY2015’s lower average 10-year return is a great concern,” commented NACUBO President and Chief Executive Officer John D. Walda. “On average, institutions derive nearly 10 percent of their operating funds from their endowments. Lower returns may make it even tougher for colleges and universities to adequately fund financial aid, research, and other programs that are very reliant on endowment earnings and are vital to institutions’ missions.”
And the size of an endowment can be an indicator of the financial health of an institution. Nearly all endowments took serious hits after 2008 and have been working hard to recover since.
Although the largest endowments mostly support elite private colleges and universities, a handful of public institutions and systems have made it into the top 20 endowments including the University of Texas System (3), The Texas A&M System (7), University of Michigan (10), University of California (13), and the University of Virginia (18).
And it’s also interesting to look at U.S. institutions with top 200 endowments that experienced significant—well above average—growth over the past year. Among these are University of Denver (35.4%), UC Irvine (32.5%), UC San Francisco (23%), University of Utah (21.9%), and Bowdoin College (14.5%).
The DC area is home to a number of colleges with endowments among the top 200 in the nation, including the University of Virginia (18), Johns Hopkins University (28), University of Richmond (37), Virginia Commonwealth University (56) George Washington (57), Georgetown (61), Washington and Lee University (67), University System of Maryland (97), Virginia Tech (114), The College of William & Mary (115), Howard University (147), American University (158) and Virginia Military Institute (197).
The complete list of colleges and universities participating in the 2015 survey may be found on the NACUBO website. For the record, here are the top 25 by rank order ($000s):
- Harvard University: $36,448,817 (+1.6% over FY2014)
- Yale University: $25,572,100 (+7%)
- University of Texas System: $24,083,150 (-5.3%)
- Princeton University: $22,723,473 (+8.2%)
- Stanford University: $22,222,957 (+3.6%)
- Massachusetts Institute of Technology: $13,474,743 (+8.4%)
- Texas A & M University System: $10,477,102 (-5.6%)
- Northwestern University: $10,193,037 (+4.2%)
- University of Pennsylvania: $10,133,569 (+5.8%)
- University of Michigan: $9,952,113 (+2.3%)
- Columbia University: $9,639,065 (+4.5%)
- University of Notre Dame: $8,566,952 (+6.6%)
- The University of California: $7,997,099 (+8.3%)
- University of Chicago: $7,549,710 (+0.1%)
- Duke University: $7,296,545 (+3.7%)
- Washington University: $6,818,748 (+2.6%)
- Emory University: $6,684,305 (0)
- University of Virginia: $6,180,515 (+3.9%)
- Cornell University: $6,037,546 (+2.5%)
- Rice University: $5,557,479 (+0.5%)
- University of Southern California: $4,709,511 (+2.5%)
- Dartmouth College: $4,663,730 (+4.4%)
- Vanderbilt University: $4,133,542 (+1.2%)
- The Pennsylvania State University: $3,635,730 (+5.5%)
- Ohio State University: $3,633,887 (+2.4%)