IHEs experienced an 8 percent increase in endowment returns in the 2003-2004 academic year, up from 3 percent the year before, according to the new Commonfund Benchmarks Study (www.commonfund.org). While larger institutions reported higher returns and increased gifts, smaller institutions more often reported reductions in their levels of debt.
But rising interest rates mean institutions will expect lower returns next year, says John Griswold, executive director of the Commonfund Group. "The average expectation is around 7 to 8 percent for stocks and a bit lower for bonds," he says. "As for hedgefunds, it's hard to tell. They have disappointed in the past year."
The benchmark leaders, known for their diversification and ability to explore alternative strategies, include Harvard and Yale, the University of Michigan and the University of Texas.