Preliminary data indicates educational endowments earned investment returns averaging 11.7% in FY2013

Lauren Williams's picture

Preliminary data gathered from 461 U.S. colleges and universities for the 2013 NACUBO-Commonfund Study of Endowments® (NCSE) indicate that these institutions’ endowments returned an average of 11.7 percent (net of fees) for the 2013 fiscal year (July 1, 2012 – June 30, 2013). The preliminary FY2013 return is a marked improvement over the -0.3 percent return reported by Study participants for FY2012.

The data are broken down into six categories according to size of endowment, ranging from institutions with endowment assets under $25 million to those with assets in excess of $1 billion. Fiscal year 2013 returns were very consistent across five of the six size cohorts, ranging from 11.2 percent to 11.8 percent (all returns are reported net of fees). Institutions with assets between $501 million and $1 billion reported average returns of 12.7 percent. These figures may be modified when the full data set is assembled in the final Study.

The annual NCSE analyzes return data and a broad range of related information gathered from U.S. colleges and universities, both public and private, as well as their supporting foundations. The size and scope of the Study make it the most comprehensive annual report on the investment management and governance practices and policies of institutions of higher education across the U.S. Eight hundred thirty-one colleges and universities participated in last year’s Study; it is anticipated that the FY2013 Study will be similar in size by the time all data are gathered, analyzed and published in January 2014. The returns included thus far are based on 206 endowments and foundations that have completed the full 2013 Study, plus a further 255 that have publicly announced their one-year returns but have not yet completed their NCSE survey questionnaire.

Longer-term returns Additional findings based on preliminary data­drawn from the sample of 206 institutions that have completed the survey­show that participating institutions’ trailing three-year returns averaged 10.4 percent; trailing five-year returns averaged 4.3 percent; and trailing 10-year returns averaged 7.1 percent. Endowments with assets under $25 million reported the highest average three-year return, at 11.0 percent, while those with assets between $25 and $50 million reported the highest average five-year return, at 5.5 percent. Endowments with assets over $1 billion generated the highest average 10-year return, at 8.5 percent.

One preliminary finding may indicate a pause in the long trend of growth in institutions’ allocation to alternative investment strategies. In FY2013 the average allocation fell to 47 percent of participating endowments’ portfolios from 54 percent in FY2012. Institutions in four of the six size categories reduced their allocation to alternative strategies, while for the other two the allocation was unchanged. (Alternative strategies include marketable alternatives, such as hedge funds, absolute return, market neutral, long/short 130/30, event-driven and derivatives; private capital, including private equity, international private equity, global venture capital and natural resources; distressed debt; and private equity real estate.)

In contrast to the decline in alternative strategies, participating institutions’ average allocation to domestic equities grew to 20 percent from 15 percent, and their allocation to international equities increased to 19 percent from 16 percent. In combination, this increase to publicly traded equities exceeded the decline in alternative strategies. The allocation to fixed income investments was unchanged at 11 percent, while the allocation to short-term securities/cash/other declined slightly to 3 percent from 4 percent the previous year.

“The data concerning alternative strategies will bear watching as more colleges and universities report their FY2013 results,” commented NACUBO President and Chief Executive Officer John D. Walda and Commonfund Institute Executive Director John S. Griswold in a joint statement. “A number of factors are at work here. Colleges and universities may be shifting some assets into more-liquid strategies, but because domestic and international equities were the two best performing asset classes in FY2013, some of the shift may have been the result of market action.”

Preliminary FY2013 returns broken out by asset class are:

  • Domestic equities: 20.5 percent
  • Fixed income: 2.4 percent
  • International equities: 14.4 percent
  • Alternative strategies: 8.6 percent
  • Short-term securities/cash/other: 1.0 percent

Distressed debt leads alternative strategies Breaking down the returns reported for various alternative strategies, distressed debt produced the highest return, at 13.2 percent, followed by 11.3 percent for private equity (LBOs, mezzanine and M&A funds, international private equity) and 10.0 percent for marketable alternatives (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives). Private equity real estate (non-campus) returned 9.0 percent, energy and natural resources returned 6.1 percent and venture capital returned 5.9 percent. Commodities and managed futures returned -6.0 percent, the year’s only investment strategy to report a negative return. - More -

The FY2013 effective spending rate for the 206 institutions included in the preliminary data averaged 4.2 percent, unchanged year over year. The spending rate correlated with the size of the six cohorts; the highest rate, 4.8 percent, was reported by institutions with assets over $1 billion while those with assets under $25 million reported a rate of 3.6 percent. Thus far in the Study, 50 percent of participating institutions have reported an increase in gifts, while 30 percent have reported a decrease in gifts.

Full-time staff declines Endowments reported an average of 1.2 full-time equivalent employees devoted to the investment management function in FY2013. This was a marked decline from the average of 1.6 FTEs reported for FY2012. Some of this change may be accounted for by a rise in outsourcing. Forty-two percent of Study respondents said they have substantially outsourced the investment management function, up from 38 percent the prior year. Five of six size cohorts reported a greater use of outsourcing in FY2013.

In a new area of inquiry, the Study found that 45 percent of participating institutions employ risk limits in their portfolios, while 33 percent said they do not. Sixty-nine percent of this group use volatility calculations, such as standard deviation, and 54 percent use measures such as alpha and beta. Thirty-nine percent of the 206 total respondents reported using stress testing or scenario analysis for their portfolios.

Final Study results and analysis will go into much greater depth­including data on governance policies and practices­and will break out data not only by size of endowment but also by type of institution (public, private and foundations, both institution-related and combined endowments/foundations).


NACUBO is a membership organization representing more than 2,500 colleges, universities and higher education service providers across the country and around the world. NACUBO specifically represents chief business and financial officers through advocacy efforts, community service and professional development activities. The association’s mission is to advance the economic viability and business practices of higher education institutions in fulfillment of their academic missions. For additional information, please visit

About Commonfund Institute

Commonfund Institute houses the education and research activities of Commonfund and provides the entire community of long-term investors with investment information and professional development programs. Commonfund Institute is dedicated to the advancement of investment knowledge and the promotion of best practices in financial management. In addition to teaming with NACUBO to produce the NCSE, Commonfund Institute provides a wide variety of resources, including conferences, seminars and roundtables on topics such as endowments and treasury management; proprietary and third-party research and publications, including the Higher Education Price Index (HEPI); and events such as the annual Commonfund Forum and Commonfund Endowment Institute.

About Commonfund

Founded in 1971, Commonfund is devoted to enhancing the financial resources of long-term investors including nonprofit institutions, corporate pension plans and family offices through superior fund management, investment advice and treasury operations. Directly or through its subsidiaries­Commonfund Capital and Commonfund Asset Management Company­Commonfund manages nearly $25 billion for about 1,400 clients. Commonfund, together with its subsidiary companion organizations, offers more than 30 different investment programs. All securities are distributed through Commonfund Securities, Inc. For additional information about Commonfund, please visit

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