Univ. Endowment Performance Below Average, According to Nat’l Study

The University’s endowment returns lagged behind those of other American colleges and universities during fiscal year 2014, according to early findings from a study of 426 institutions of higher education conducted by the National Association of College and University Business Officers and Commonfund Institute.

The study found that these institutions averaged a return rate of 15.8 percent, slightly higher than the 15.4 percent returns posted by Harvard's endowment, which is the largest among U.S. institutions of higher learning and is currently valued at $36.4 billion. The University’s endowment, which is managed by Harvard Management Company, also returned a lower rate than the 16.8 percent average for institutions with assets in excess of $1 billion, according to the early study from NACUBO.

“With only a few exceptions, higher relative performance by the largest endowments is in keeping with the findings of our Studies over more than a decade,” said Commonfund Institute executive director John S. Griswold in a press release. “The greater diversification practiced by the largest endowments and their emphasis on a variety of sources of return, both public and private, tends to result in higher long-term investment performance.”

The report noted that colleges and universities are continuing the trend of increasing allocations to alternative investment strategies, such as private equity and private capital, with 65 percent of institutions with assets of $1 billion or more employing such alternatives. Venture capital, energy and natural resources, and private equity posted the highest returns among the various asset classes, with averages of 21.2 percent, 18.4 percent, and 17.0 percent, respectively, according to the report. No asset class had a negative return in FY 2014.  

Across most asset classes, Harvard experienced strong returns, although it reported weak gains in public and private equities, at .9 percent and 1.3 percent, respectively. According to the University’s most recent financial report, HMC plans to continue to increase its allocation to private equity in 2015, with a target of 18 percent.

The NACUBO report also cited the continuation of double-digit gains in four of the past five years by surveyed institutions, with endowments beginning to recover and rebuild after suffering losses in fiscal years 2008 and 2009.

The data represents only a subset of the total sample of institutions that the study will evaluate. Approximately twice the 426 colleges and universities surveyed in the preliminary gathering will be taken into account for the final report, which is slated for release in January 2015.

—Staff writer Alexander H. Patel can be reached at Follow him on twitter @a2xp3l.