- College and university endowments had returns of 5.3% in the 2019 fiscal year, down from 8.2% in 2018, according to the latest annual data from the National Association of College and University Business Officers (NACUBO) and TIAA Endowment and Philanthropic Services.
- Ten-year average returns rose to 8.4% — the first time in a decade they surpassed institutions' 7% target — largely because the range no longer includes data from 2009, blunting the impact of the recession and emphasizing the recovery period.
- Three-quarters of the 774 responding institutions spent more from their endowments in 2019 than they did the year before, with a median increase of 10%. About half of the withdrawals went toward financial aid.
College endowments collectively valued $630 billion last year, up 2.2% from the year before. The median endowment in 2019 was $144 million, though 39% of responding institutions had endowments of $101 million or less.
The latest annual return, 5.3%, is consistent with returns offered in the global capital markets, TIAA CEO Kevin O'Leary said on a call Wednesday to discuss the data. And while the 10-year return rate is higher than in previous years, he cautioned that the apparent growth is largely because the figure now only represents returns during the post-recession recovery period.
"It is best to think of longer-term returns over a full market cycle, which would include both the trough and the recovery," he said, pointing to the lower 15- and 20-year average return rates of 6.7% and 6.2%, respectively.
Meanwhile, institutions' target for endowment returns steadily decreased from 7.7% in 2010 to 7% last year.
Endowment returns are critical as colleges and universities seek sustainable ways to steady their finances in light of stunted state funding and projected enrollment declines. Many have sought to increase aid to students.
Nearly half (49%) of endowment spending went toward financial aid, according to NACUBO's data. That's consistent with 2018, the year the survey started tracking the metric.
The average spending rate was 4.5% in 2019, largely flat over the last decade while the sector's inflation rate varied more widely during that time, between 0.9% to 3.4%.
Institutions with the largest endowments increased average spending by more than $9.6 million year-over-year in 2019, said Liz Clark, vice president for policy and research at NACUBO, on the call. That's compared to the average spending increase of nearly $2 million and the median uptick of slightly more than $600,000.
While endowments of more than $1 billion performed the strongest last year, those with assets of $25 million or less were the second best-performing.
Harvard, Yale, Stanford and Princeton universities, along with the University of Texas System, again had the largest endowments. Private institutions accounted for 62% of respondents and 68% of the total endowment value in 2019, or around $428 billion.
Until NACUBO and TIAA's 2020 data is released, however, the public won't know the effect of a 1.4% excise tax on the net investment income of private colleges with 500 or more students and per-student assets of at least $500,000. Congress approved the tax in 2017.
Harvard has said it expects to pay $50 million as a result of the tax, or about 1% of its annual revenue. The university's endowment valued $39.4 billion in 2019.
The report covers the period from July 1, 2018, to June 30, 2019.
Biggest endowments in fiscal year 2019
|Institution||FY 2019 endowment value (millions)||Change from FY 2018||Endowment value per full-time student in FY 2019|
|Harvard University||$39,428 million||2.95%||$1.6 million|
|University of Texas System||$30,958||0.23%||$163,514|
|Yale University||$30,315||3.28%||$2.3 million|
|Stanford University||$27,700||4.67%||$1.6 million|
|Princeton University||$26,116||0.77%||$3.1 million|
|Massachusetts Institute of Technology||$17,569||6.29%||$1.5 million|
|University of Pennsylvania||$14,650||6.33%||$629,826|
|Texas A&M University System*||$13,515||-0.08%||$109,786|
|University of Michigan||$12,449||4.6%||$216,758|
|University of Notre Dame||$11,268||5.04%||$906,400|
Source: 2019 NACUBO-TIAA Study of Endowments; *Includes the endowment assets from The Texas A&M University System and multiple supporting foundations, including the Texas A&M Foundation.