After two years of healthy growth, colleges' endowment investment return rates fell in 2015. While they didn't come close to the declines of some years in the past decade, the average rate is the lowest reported since 2012.

On average, colleges had 2.4 percent returns for the 2015 fiscal year, according to an annual survey by Commonfund and the National Association of College and University Business Officers. The survey includes data from 812 U.S. colleges and universities.

That’s considerably lower than the past two years, when returns hit the double digits. But the rate is higher than 2012's drop of 0.3 percent.

That kind of inconsistency isn’t abnormal, and it’s important to note how much average returns change over time. Looking back over the last decade, they go up and down every couple of years.

“The main point here is to illustrate the volatility of the age in which we live,” said William Jarvis, executive director of the Commonfund Institute. “If you were to even go back farther to the 2000, 2001 period -- which some of us remember -- it would be the same jaggedy path.”

The causes of this year’s lower returns aren’t a mystery, he added: the challenging market environment, the economic slowdown in China and the decrease in the price of oil all contributed to the decline.

Returns generally correlated with endowment size -- the wealthier the institution, the larger the returns. Colleges with endowments over $1 billion reported average returns of 4.3 percent, while colleges with endowments between $25 million and $50 million reported average returns of 1.9 percent. The only exception was the smallest category -- colleges with endowments under $25 million -- which reported average returns of 2.3 percent.

This year’s decrease also caused the 10-year average to dip to 6.3 percent. That's compared with 7.1 percent last year, and is below the 7.5 percent that many endowments need to maintain their purchasing power.

“Not being able to meet that long-term target may very well make it harder for schools to increase endowment spending,” said John Walda, NACUBO's president and CEO.

While state support for higher education is slowly going back up, he said, it’s still much lower now on average than it was before the recession. Institutions have been using their endowments to make up for those losses -- and without being able to hit their target 10-year average, colleges may find that harder to do.

But despite the low returns, most colleges -- 78 percent -- reported increased spending dollars from their endowments in 2015. That’s even slightly more than last year, when investment returns were considerably higher.

On average, colleges reported an increase in spending of 8.8 percent in 2015, a number well above inflation, Walda said. “That is a significant addition to the funds which were available to these institutions to support programs for students.”

How the money is used has a lot to do with the intent of the donors, Walda said. Because so many donors want to support students specifically, it’s likely that a great deal of this year’s spending went toward scholarships and financial aid.

But it may be harder for schools to raise their spending going forward, he added. And with the other fiscal challenges institutions are facing at the same time, such as declining enrollments and the pressure to cut tuition, that could pose a problem.

“Even this year, with endowment returns as low as they are, we can increase spending,” he said. “But you have to ask, how long can that continue?”

The average endowment is $651.5 million, but that number doesn’t reflect the average institution. Instead, it shows how dramatically the wealthiest institutions can change the average. The median endowment size is actually around $115 million.

Looking at colleges individually, not much has changed. There was some internal movement within the top 10 -- but over all, the same 10 institutions appeared. Harvard University tops the list again this year, with an endowment of $36.45 billion. While Yale University came in third last year, it moved up to second with an endowment totaling $25.57 billion.

On average, colleges relied on their endowments to fund 9.7 percent of their operating budgets in 2015, compared to 9.2 percent in 2014. But that number depends a lot on the college. Institutions with the most assets used their endowments to fund 16.5 percent of their budgets, while institutions with the least amount of assets used their endowments to fund just 4.7 percent of their budgets.

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