Thursday, January 28, 2010
This morning the National Association of College and University Business Officers released its 2009 NACUBO-Commonfund Study of Endowments. While a free copy of the study is not available, the related NACUBO press release says that on average college and university endowments shrank by 18.7 percent during the July 1, 2008 to June 30, 2009 fiscal year. Over the three years ending on June 30, 2009 the average annual return was -2.5 percent, over five years it was 2.7 percent, and over ten years it was 4.0 percent. Publicly released tables from the report show the the schools with the largest endowments also appear to have suffered the most, with Harvard losing 29.8 percent (down to $25.7 billion), Yale losing 28.6 percent (down to $16.3 billion), and Stanford losing 26.7% (down to $12.6 billion). They also show that when broken down by endowment size, only schools with endowments over $1 billion had a 10-year average annual return of more than 5 percent. The tables also show that average annual endowment spending was 4.4 percent in FY2009.
Despite these dismal returns, Senator Chuck Grassley (R-Iowa) wasted no time in issuing a press release calling for all asset-accumulating charities to be subject to a consistent payout rate requirement. While he stopped short of saying that the requirement should be equal to the existing 5 percent private foundation payout rate, he criticized colleges and universities for the fact that their average payout rates rarely topped 5 percent during the past decade even in years when they enjoyed double-digit returns. He also urged them not to penalize students and parents for the negative results of risky investments.
For additional coverage, see:
Boston Globe: Harvard Endowment Leads Others Down
Chronicle of Higher Education: Average Return on Endowment Investments is Worst in Almost 40 Years
USA Today: College Endowments Lose 18.7% on Returns
Wall Street Journal: College Endowments Plunged in 2009