For college endowments, 2004 was a very good year -- with an average return of 15.1 percent, according to data released today by the National Association of College and University Business Officers.

But after several years in which most colleges posted modest gains or lost money, NACUBO warned that the strong figures from one year would not offset the damage of the economic downturn. The five-year average for endowment returns (including the 2004 successes) is only 3.8 percent. When factoring in inflation and the money colleges spent from their endowments, many endowments are no stronger than they were five years ago.

The endowments that are doing the best are those that were already the strongest. Over the last five years, colleges with endowments greater than $1 billion enjoyed an average return of 7.5 percent (with a 17.2 percent return in 2004). In contrast, colleges with endowments of $25 million or less earned an average return of 2.4 percent in the last five years (with a 12.4 percent return in 2004).

Why do the rich get so much richer? Investment strategies vary from institution to institution, but generally, wealthier colleges (like wealthier individuals) use a wider variety of investments, and feel flush enough to put money in high-risk, but potentially high-return, investments. So most wealthy institutions invest significantly in hedge funds, and also put money in private equity, natural resources, and real estate -- all areas that colleges with modest endowments would generally avoid.

The gaps among institutions are large and growing. Harvard tops the list of endowments at $22.1 billion and Yale is second at $12.7 billion. But only 47 colleges reported endowments worth more than $1 billion, and just 6 have endowments that exceed $5 billion. In fact, the gains in Harvard's endowment this year -- just under $3.3 billion -- equal the entire combined endowments of Amherst College, Southern Methodist University, Carnegie Mellon University, and Colorado College. (And those four institutions are all among the wealthiest 100 in the United States.)

Eight institutions saw their endowments pass the $1 billion threshold in 2004: Boston, Pomona, and Swarthmore Colleges, the Universities of Illinois and Richmond, and Indiana, Penn State, and Yeshiva Universities.

The NACUBO study does not provide information on the investment returns of individual colleges. But it does release information on the endowment growth of institutions. Growth is influenced by investment returns, but also gifts to the endowment, spending of endowment funds, and other factors.

The following table shows the top 20 endowments, and their gains in 2004:

Among community colleges in the NACUBO study, the following are the five largest endowments. (Rank refers to rank among all institutions.)

Among historically black colleges in the NACUBO study, the following are the five largest endowments. (Rank refers to rank among all institutions.)

The following are the 12 colleges that saw endowment growth of more than 50 percent. (Rank refers to rank among all institutions.)

The following are the 11 colleges with endowments that lost money in the last year. (Rank refers to rank among all institutions.)

A complete version of the endowment report will be available on CD-ROM in February. The price is $69.95 for NACUBO members and $199.95 for others. Advance orders may be placed at (866) 348-6300.