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College endowments sag 23 percent

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Driven primarily by tanking investment returns, the endowments of U.S. colleges and universities dropped an average of 22.9 percent from July 1 to November 30 of last year, a new study says.

In fiscal 2008, which ended June 30, investment returns for institutions of higher education fell an average of 3 percent, says the NACUBO Endowment Study.

Investment returns spiraled down an additional 22.5 percent on average during the first five months of the 2009 fiscal year, says a follow-up study conducted by NACUBO and the Commonfund Institute.

While those losses represent billions of dollars, higher education did outperform the Standard & Poor’s 500 Index, which fell by 43.4 percent from July 1 through November 30, the report says.

While larger endowments generally outperform smaller ones, all endowment classes saw their returns fall by at least 20 percent during that five-month period.

Endowments ranging from $500 million to $1 billion saw the largest decline in asset value, with their endowments losing more than a quarter of their value on average from July 1 to November 30.

Those larger than $1 billion saw an average drop of 20 percent.

While many schools use money from their endowments to cover operating costs, six in 10 say they have no plans to change the amount they take out in fiscal 2009.

About one in four plan to decrease the amount, the report says.

Only 1.1 percent plan to increase the amount.

Although the future impact of the endowment losses remains unclear, 35 schools surveyed anticipate budget cuts this year, and eight have instituted hiring freezes and other policies designed to reduce administrative expenses.

Thirteen schools say they expect their enrollment to suffer due to the economy, the report says, while nine expect to reduce their expenses for financial aid.

The follow-up study includes responses from 435 U.S. colleges and universities, including 39 of the 77 institutions with endowments of $1 billion or more.

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