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Whether it's the start of a recovery or the calm before the storm can't be known yet. Whichever is the case, college and university business officers and investment managers will take it. The 2010 survey of endowments, released today by Commonfund and the National Association of College and University Business Officers, shows a solid rebound (to 11.9 percent, up from -18.7 percent in 2009) in the average return for the 850 institutions surveyed.
"The study results are pretty positive. And when compared to last year, they're really positive," John Walda, president and chief executive officer of the business officers' group, said at a news conference about the report's release.
As pleased and (especially) relieved as campus financial administrators might be by the "impressive turnaround," though, Walda said, the average endowment still lags well behind its pre-downturn standing in 2008 (the three-year average return is -4.2 percent). Beyond that, many campus leaders recognize that the financial squeeze on higher education -- particularly in the form of lagging state government support and external demands to limit tuition increases -- increases the pressure on many institutions to use their endowment and fund raising money to support their operations.
"The stress on higher education is not diminished, even though we had a positive return," said Verne O. Sedlacek, president and chief executive officer of Commonfund. "The underlying data show that the funds are a little more conservative," so institutions seem to be behaving cautiously as they look ahead.
The extent to which institutions are indeed behaving more conservatively with their endowments -- and indeed whether anything at all has really changed -- is difficult to say from the data in the endowment survey alone, which provides mixed evidence.
Key Indicators Recover
In several key ways, the 2010 endowment figures reflect a return to relative normalcy. Whereas 2009 marked a break with longstanding outcomes -- in that colleges with smaller endowments outperformed those with larger ones and the conservative category of fixed income assets was the only type of investment to show a positive return -- 2010 marked a reversion.
Universities with over $1 billion in endowment assets outperformed their peers, although the groupings were tightly bunched, from a high of 12.2 percent return for the biggest funds to a low of 11.6 percent for the smallest endowments -- those of under $25 million.
And all categories of investments except real estate provided positive gains for the funds that invested in them, led by domestic equities (15.6 percent), fixed income (12.2 percent), international equities (11.6 percent) and alternative strategies (7.5 percent).
The 2008 collapse of the financial markets was felt most powerfully by many colleges and universities in the form of a liquidity squeeze, as their investments declined and many found themselves unable to borrow to fill the gaps. The NACUBO/Commonfund survey shows some signs that institutions have altered their endowment policies as a result; the proportion of endowment funds invested in the category known as "short-term securities/cash/other" rose to 5 percent in 2010 from 1 percent in 2008, for instance. That is despite the fact that investments in cash are, as Sedlacek put it, a "significant drag on endowment returns" (as anyone with a savings account these days can affirm).
Though the 5 percent figure represents a small proportion of endowment investments over all, "that's still a pretty significant increase, especially when you consider that a few years ago, the endowment model called for no cash," said John S. Griswold Jr., executive director of the Commonfund Institute.
In other ways, behavior appeared to have changed little. The proportion of endowment funds invested in "alternative strategies" -- private equity, venture capital and hedge funds, energy and other commodities futures, and distressed debt -- continued its long-term rise (to 52 percent from 46 percent in 2008), for instance.
Lucie Lapovsky, a higher education consultant and former president of New York's Mercy College, said she was surprised by how little colleges appeared to have reallocated their funds into more liquid investments, but "obviously schools have determined that they could handle" the large investment in alternative assets.
John R. Curry, a managing director at Huron Consulting, said that stronger evidence of that -- impossible to tell from the information contained in the endowment survey, which does not cover that -- would be "what they're keeping in their short-term fund balances outside endowments." He said his anecdotal sense is that colleges and universities "have taken cautions in that regard, with larger lines of credit" and other safety nets.
One other trend suggested by the data in the Commonfund/NACUBO study is an increasing divergence between the approaches taken by bigger and smaller endowments, especially in the area of how much they depend on their endowments to support their day-to-day operations.
While the average annual spending rate for the largest endowments rose sharply in 2010 -- to 5.6 percent from 4.6 percent in 2009 and 4.2 percent in 2008 -- such rates tend to rise in bad economic times and to fall in good years. The spending rates for endowments under $25 million, meanwhile, have declined consistently over the past decade, from 4.9 percent in 2001 to 3.5 percent in 2010, and those of $25 million to $50 million have experienced a dip that is similar if not quite as steep.
Lapovsky said she read those numbers to indicate that small colleges have increasingly concluded that endowment money "is an unreliable source of income, so let's not get dependent on it.... The small guys were starting to think they had to play with the big guys, but they seem to be reconsidering that."
The following tables show the institutions with the largest endowments in 2010, over all and in a variety of categories. The percentages shown are not the rates of returns for their investments, but the change in the market value of their endowment assets over all.
30 Colleges and Universities With the Largest Endowment Values, 2010
| Institution Name | 2010 Endowment ($000) | 2009 Endowment ($000) | % Change |
| Harvard U. | $27,557,404 | $26,138,239 | 5.4% |
| Yale U. | 16,652,000 | 16,327,000 | 2.0% |
| Princeton U. | 14,391,450 | 12,614,313 | 14.1% |
| The U. of Texas System | 14,052,220 | 12,163,049 | 15.5% |
| Stanford U. | 13,851,115 | 12,619,094 | 9.8% |
| Massachusetts Institute of Technology | 8,317,321 | 7,880,321 | 5.5% |
| U. of Michigan | 6,564,144 | 6,000,827 | 9.4% |
| Columbia U. | 6,516,512 | 5,892,798 | 10.6% |
| Northwestern U. | 5,945,277 | 5,445,260 | 9.2% |
| The Texas A&M U. System & Foundations | 5,738,289 | 5,083,754 | 12.9% |
| U. of Pennsylvania | 5,668,937 | 5,170,539 | 9.6% |
| U. of Chicago | 5,638,040 | 5,094,087 | 10.7% |
| U. of California | 5,441,225 | 4,937,483 | 10.2% |
| U. of Notre Dame | 5,234,841 | 4,795,303 | 9.2% |
| Duke U. | 4,823,572 | 4,440,745 | 8.6% |
| Emory U. | 4,694,260 | 4,328,436 | 8.5% |
| Washington U. in St. Louis | 4,473,180 | 4,080,554 | 9.6% |
| Cornell U. | 4,378,587 | 3,966,041 | 10.4% |
| U. of Virginia | 3,906,823 | 3,577,266 | 9.2% |
| Rice U. | 3,786,548 | 3,612,884 | 4.8% |
| Vanderbilt U. | 3,044,000 | 2,867,541 | 6.2% |
| Dartmouth College | 2,998,302 | 2,824,894 | 6.1% |
| U. of Southern California | 2,947,978 | 2,671,426 | 10.4% |
| New York U. | 2,370,000 | 2,094,000 | 13.2% |
| Johns Hopkins U. | 2,219,925 | 1,976,899 | 12.3% |
| U. of Minnesota and Affiliated Foundations | 2,195,740 | 2,085,550 | 5.3% |
| Brown U. | 2,155,330 | 2,017,292 | 6.8% |
| U. of Pittsburgh | 2,032,798 | 1,837,216 | 10.6% |
| U. of North Carolina at Chapel Hill and Foundations | 1,979,222 | 1,905,081 | 3.9% |
| Ohio State U. | 1,869,312 | 1,651,561 | 13.2% |
10 Liberal Arts Colleges With the Largest Endowments, 2010
| Rank | Institution | 2010 Endowment (000s) | 2009 Endowment (000s) | % Change |
| 37 | Williams College | $1,526,571 | $1,409,056 | 8.3% |
| 40 | Pomona College | 1,458,974 | 1,344,542 | 8.5% |
| 42 | Amherst College | 1,385,745 | 1,305,944 | 6.1% |
| 47 | Wellesley College | 1,306,796 | 1,266,437 | 3.2% |
| 49 | Grinnell College | 1,264,834 | 1,076,250 | 17.5% |
| 50 | Swarthmore College | 1,249,254 | 1,128,675 | 10.7% |
| 51 | Smith College | 1,243,561 | 1,096,322 | 13.4% |
| 77 | Berea College | 846,776 | 791,210 | 7.0% |
| 83 | Middlebury College | 783,225 | 699,684 | 11.9% |
| 86 | Bowdoin College | 753,525 | 688,384 | 9.5% |
5 Historically Black Colleges With the Largest Endowments, 2010
| 151 | Howard University Endowment | $399,678 | $364,698 | 9.6% |
| 186 | Spelman College | 295,220 | 285,327 | 3.5% |
| 234 | Hampton University | 212,712 | 193,427 | 10.0% |
| 375 | Florida A&M University Foundation | 96,154 | 87,770 | 9.6% |
| 386 | Meharry Medical College | 90,659 | 75,242 | 20.5% |
5 Community Colleges With the Largest Endowments, 2010
| 477 | Valencia Community College and Foundation | $63,234 | $60,057 | 5.3% |
| 658 | Kentucky Community & Technical College System | 29,007 | 24,877 | 16.6% |
| 674 | Harrisburg Area Community College | 25,903 | 20,035 | 29.3% |
| 695 | Northampton County Area Community College Foundation | 23,892 | 19,839 | 20.4% |
| 705 | Sinclair Community College Foundation | 22,219 | 21,049 | 5.6% |
5 Canadian Universities With the Largest Endowments, 2010
| Rank | Institution | 2010 Endowment | 2009 Endowment | % Change |
| 46 | U. of Toronto | 1,318,427 | 1,145,788 | 15.1% |
| 69 | U. of British Columbia | 894,896 | 775,748 | 15.4% |
| 82 | McGill U. | 786,342 | 669,791 | 17.4% |
| 97 | U. of Alberta | 654,330 | 550,074 | 19.0% |
| 146 | McMaster U. | 411,239 | 348,803 | 17.9% |
Source: NACUBO/Commonfund
