Colleges see investment returns rise

PJ staff report

In an early look at fiscal 2010, U.S. colleges and universities appear to have earned about 12.6 percent on their endowments, a new study says.

While back in positive territory after posting investment losses of 19 percent in fiscal 2009, 2010 performance still lags the 14.4 percent earned by the Standard & Poor’s 500 Index over the same period, says the preliminary report from NACUBO and the Commonfund Institute.

Among the 80 schools included in the preliminary report, the highest investment return for the year ended June 30, 2010, was 36.2 percent, while the lowest was 4.8 percent.

And in a reversal of roles, smaller institutions bested their larger counterparts in fiscal 2010.

Schools with assets under $25 million posted an average return of 14.1 percent, while those with assets of more than $1 billion earned 12.3 percent.

That disparity likely is caused by smaller schools’ traditional reliance on domestic equities and fixed income, asset classes that fared better than others in the wake of the recession.

Fiscal 2010’s stronger performance brings three-year returns to negative 3.4 percent for a sample of 64 schools, while five-year returns stand at 2.7 percent and 10-year returns are 3.2 percent.

The effective spending rate for the same subset of institutions was basically flat at 4.3 percent in fiscal 2010, and the median gift to endowments was $1.1 million.

The full report, containing performance results of hundreds of colleges and universities, will be released in late January.

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