Universities See Sluggish Endowment Returns

Fiscal year 2023 marked a mixed bag for university endowment returns.

While a complete picture is not yet available—not all institutions have published their latest figures—some of the nation’s richest universities saw sluggish returns, according to their financial reports. Some blamed the slide on the underperformance of private equity and venture capital investments.

Results differed sharply from the sky high returns of fiscal year 2021, more closely resembling endowment performances in FY 2022, which showed mostly modest returns across the board. Many officials emphasized in university financial reports that long-term investment strategies and 10-year returns matter more than the results in any one year.

How Top Endowments Fared

The rich mostly got richer in fiscal year 2023, but only slightly so; with a few notable exceptions, the majority of the top 20 endowments (as identified in a February report by the National Association of College and University Business Officers) saw returns under 5 percent.

Harvard University, which has the largest single-institution endowment in the nation, saw a 2.9 percent return in fiscal year 2023. Harvard’s endowment was recently valued at $50.7 billion. But even the nation’s richest university isn’t immune to inflationary pressures.

“Inflation has been persistent in every arena—wages, supplies, construction costs—and is not yet behind us. Interest rates are higher than they have been in decades, which adds to our costs and puts pressure on the broader financial markets,” Chief Financial Officer Ritu Kalra told Harvard’s in-house magazine. “Going forward, we will need to watch the pace of operating expense growth, which was nearly double this year’s revenue growth. That was purposeful this year, but that level of growth is not sustainable over the long run.”

Elsewhere, the University of Michigan reported a 5.2 percent return on its $17.9 billion endowment and Columbia University saw a 4.7 percent return on its endowment of $13.6 billion.

Stanford University reported a 4.4 percent return on its $40.9 billion endowment (reversing a 4.2 percent loss in FY2022). Robert Wallace, chief executive officer of Stanford Management Company said in a statement that “strong results in most asset classes during the past year were partially offset by losses in our venture capital and growth equity portfolios.”

Cornell University had a 3.6 percent return, lifting its endowment to $10 billion.

Others saw smaller returns on their investments.

Yale University, which has an endowment valued at $40.7 billion, saw a 1.8 percent return for FY2023. Other institutions with multi-billion dollar endowments fared similarly; the University of Pennsylvania clocked a 1.3 percent return on its $21 billion endowment, while the University of Virginia reported a 2 percent return on its endowment of $13.6 billion.

Overall, the top 20 higher ed institutions underperformed compared to institutions in other sectors with similarly-sized endowments. Estimates published by Wilshire Trust Universe Comparison Service earlier this year found that foundations and endowments with assets over $1 billion earned a median return of 7 percent for FY 2023, while plans under $1 billion saw a median return of 8.6 percent.

And some of the nation’s largest university endowments actually noted losses this year.

A preliminary performance summary from The University of Texas/Texas A&M Investment Management Company indicated a 2.8 percent loss on its $54.5 billion in endowment funds.

Princeton University reported a 1.5 percent loss on its $35.8 billion endowment, while the Massachusetts Institute of Technology saw a 2.9 percent loss on its $24.7 billion endowment. Similarly, Duke University saw a loss of 1 percent on its $11.6 billion endowment and Vanderbilt University had a 2 percent loss on its $9.7 billion endowment.

Among institutions with the top 20 largest endowments, some—including the University of Notre Dame and Washington University in St. Louis—have not yet published their endowment figures. Those returns, which will be included in annual financial reports to be released next year, should offer a more complete picture of how institutional investments performed in FY2023.

Big Gains Elsewhere

Outside the top 20, a number of universities noted strong returns.

According to the Pensions & Investments U.S. Endowment Returns Tracker, the biggest was 10.5 percent for the University of Wisconsin-Madison, followed by a 9.8 percent return for the University of Nebraska Foundation; 9 percent for the University of Illinois Foundation; 8.6 percent for Syracuse University; 8.2 percent for the University of Arkansas Foundation; 7.8 percent for the University of Colorado Foundation; 7.5 percent for Leigh University; 7 percent for the University of Minnesota Foundation; and 7 percent for Case Western Reserve University.