Study: Educational Endowments' Investment Returns Averaged 15.5 Percent in FY2014
(Press release, Jan. 29, 2015) — Final data gathered from 832 U.S. colleges and universities for the 2014 NACUBO-Commonfund Study of Endowments® (NCSE) show that these institutions’ endowments returned an average of 15.5 percent (net of fees) for the 2014 fiscal year (July 1, 2013 – June 30, 2014) compared with 11.7 percent for the 2013 fiscal year. The 832 institutions participating in this year’s Study represented $516.0 billion in endowment assets.
These rising return rates have enabled colleges and universities to increase spending from their endowments to support student financial aid programs, faculty research, and other activities vital to their missions. In fiscal year 2014, 74 percent of all NCSE respondents said they increased spending from their endowments, with a median increase of 9.3 percent. On average, annual endowment funds accounted for 9.2 percent of institutions’ total operating budgets (compared with 8.8 percent in 2013).
Domestic equities generated the highest return in FY2014, at 22.8 percent, followed by international equities, at 19.2 percent. Alternative strategies returned 12.7 percent, fixed income returned 5.1 percent and short-term securities/cash/other returned 1.9 percent. Returns for all five asset classes were higher in FY2014 than they were in the previous fiscal year. (All returns are reported net of fees.)
Breaking down the returns reported for various alternative strategies, venture capital provided the highest return, at 23.3 percent, a nearly fourfold rise compared with last year’s 6.1 percent return. Private equity (LBOs, mezzanine, M&A funds and international private equity) followed at 16.5 percent. After that, in descending order, returns were: energy and natural resources at 15.3 percent; distressed debt at 13.2 percent; private equity real estate (non-campus) at 12.6 percent; marketable alternative strategies (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives) at 9.9 percent; and commodities and managed futures at 7.9 percent.