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While the money lost in the 2008 recession has not returned to most college and university endowments, institutions’ average returns for the 2011 fiscal year, which ended on June 30, approached pre-recession levels.

Preliminary data from an annual survey of endowments by the National Association of College and University Business Officers and Commonfund found that university endowments returned an average of 19.8 percent for the 2011 fiscal year, a rate that, unlike in previous years, was fairly consistent across institutions of all endowment sizes. Historically, wealthier institutions have had much greater gains, on average, than other colleges and universities. Returns ranged from 3.7 percent to 31.8 percent among individual institutions for the 2011 fiscal year.

The survey has gathered information from 284 colleges, about a third the number that survey administrators predict will respond in the final survey. But administrators said the preliminary data is enough to paint a broad picture of how higher education investments fared this past fiscal year. The full report, which includes performance broken down by individual institution, is due out in January.

While universities with large endowments have been grabbing headlines and trumpeting the return of growth that, for many, was more than 20 percent this past fiscal year, institutions of all sizes saw similar returns by employing different investment strategies, the data show. And across the board, these strategies were the same ones employed by colleges and universities before the recession, showing that even near 20-percent declines in endowment value in 2009 were not enough to send investment officers back to the drawing board.

“This has been a transitional period,” said William F. Jarvis, managing director of the Commonfund Institute. “Many institutions did well for different reasons.”

Endowment Size

Preliminary Average Return (FY 2011)

Average Return (FY 2010)

Under $25 million



$25 million - $50 million



$101 million - $500 million



More than $1 billion







For the 2007 fiscal year, institutional endowments returned about 20 percent. In 2007, the average return was 18.4 percent, with many institutions with endowments larger than $1 billion showing returns of more than 25 percent, according to NACUBO’s annual survey (the organization joined with Commonfund to conduct one survey starting in 2009).

Before the recession, institutions with multibillion-dollar endowments made large gains by diversifying their assents and taking riskier bets, which paid off handsomely in good years but resulted in massive losses when the economy contracted in 2008. In fiscal year 2009, institutions with endowments of more than $1 billion lost an average of 20.5 percent.

There was some speculation that the 2008 crisis, and the ensuing losses that wealthier institutions experienced, would drive them to rethink their strategy and take a more conservative route. But that doesn’t seem to be the case. “People have been asking me for three years if people would start turning away from this model,” Jarvis said. “Very, very little has changed.”

The institutions with more than a billion dollars continued to invest heavily in “alternative strategies” such as hedge funds. In fiscal year 2011, these institutions put an average of 53 percent in such investments.

Because of their size, small institutions often do not have access to the type of alternative investments that larger institutions make. Instead, those with endowments of less than $25 million had more invested in domestic equities and fixed-income sources, which pay a lower return but are less risky. For the 2011 fiscal year, alternative strategies only averaged 9 percent of allocations in this category. Because they were often invested in less risky assets, these institutions saw smaller losses in 2009 and modest gains in 2011.

What is true for almost all institutions, however, is that the overall size of endowments has not returned to pre-recession levels.

Harvard University, which has the largest endowment in the country, saw 16 percent growth in fiscal year 2011, to $32 billion. But that number is still significantly off the university’s peak of $37.2 billion at the end of the 2008 fiscal year. Other institutions with large endowments – a group consisting primarily of elite private research universities – saw similar gains but not enough to make up for earlier losses.

The University of Virginia made headlines this year when it became one of the first large endowments to recoup all it lost in 2009. The university, which ended the 2008 fiscal year with $5.1 billion, finished fiscal year 2011 with $5.3 billion, according to its financial statements.

Growing endowments back to their pre-recession levels takes time, said representatives of Commonfund and NACUBO. Institutions rely on these sources to fund a variety of campus operations, particularly financial aid, which is in higher demand than ever, and endowment payouts have not shrunk dramatically. Two years of 10 percent growth don’t make up for one year of 20 percent loss.

“Longer-term returns for five- and ten-year periods are only 5.0 percent and 5.5 percent, respectively – not significantly higher than the spending rate for many institutions,” said John D. Walda, president and chief executive officer of NACUBO, and John S. Griswold, executive director of Commonfund. “It will take several more years of positive returns for endowments to recover fully from the crisis.”

One thing that has changed in the past few years has been the amount of cash reserves that institutions keep on hand as a component of their endowment. One of the major problems that institutions faced when the 2008 recession struck was that assets were tied up in illiquid investments, meaning money couldn’t be quickly reallocated for other purposes.

Institutions are now keeping a significant chunk of their endowments in liquid assets, such as cash, that could be easily converted to cover losses in operating budgets. Jarvis said that at many institutions, that number falls between 5 and 10 percent of the overall endowment. Those reserves, however, do not generate large returns, so between 5 and 10 percent of each institution’s endowment isn’t gaining each year.

Because the returns were calculated for the fiscal year, which ended in July, the numbers do not capture the market’s volatility from August and September, when the U.S. was struggling to pass a bill to raise the debt ceiling, or recent volatility over Europe’s ongoing debt crisis. Those numbers will not be reflected in the final report either, since it covers the same time period.

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