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Alternative Market Briefing

NACUBO-Commonfund study: educational endowments feel long-term return pressure, alts rebound

Friday, January 26, 2018

Bailey McCann, Opalesque New York:

Data gathered from 809 U.S. colleges and universities for the 2017 NACUBO-Commonfund Study of Endowments (NCSE) show that participating institutions' endowments returned an average of 12.2 percent (net of fees) for the 2017 fiscal year (July 1, 2016 - June 30, 2017) compared with -1.9 percent for the 2016 fiscal year and 2.4 percent for fiscal 2015. Despite this year's improved return, the mission-critical 10-year average annual return fell to 4.6 percent from last year's 5.0 percent, as FY2007's strong 17.2 percent return dropped out of the trailing 10-year average.

Institutions participating in the Study reported increasing their average effective spending rate to 4.4 percent in FY2017 from 4.3 percent a year ago; the increase was led by institutions with endowment assets over $1 billion, which raised their effective spending rate to 4.8 percent from last year's 4.4 percent. Among all institutions increasing their dollar spending, the median increase was 6.5 percent, well above the inflation rate.

" The goal of achieving real returns to cover spending has been a daunting task for higher education for more than a decade-and we don't expect the challenge to get any easier," said Catherine M. Keating, President and Chief Executive Officer of Commonfund. "At the same time, with tuition discount rates at historic highs and inflation, as measured by the Commonfund Higher Education Price Index, at its highest level sinc......................

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