A recently released study by the National Association of College and University Business Officers (NACUBO) and TIAA showed that college and university endowments saw dramatic increases in investment returns, asset values and giving levels in fiscal year 2021, despite the uncertainties of the past two years.
Highlights of the study include:
- A 15% increase in new giving with particularly strong results for small- and medium-sized endowments
- Returns of more than 20% were reported for all endowment cohorts
- Gains in equities, commodities and high-yield fixed income helped drive asset values
- 65% of organizations reported receiving gifts specifically for diversity, equity, and inclusion – the first time this particular area of giving was assessed.
- Endowments generated an overall average return of more than 30% (net of fees), a dramatic increase from the less than 2% average return the previous year.
The significant gains for these college and university endowments was attributed to the market’s recovery and stabilization following the severe turbulence seen at the beginning of the pandemic.
While there was much to celebrate in the report, experts anticipate long-term returns to start trending downward. In the months ahead, inflation likely will have a significant impact on endowments, and affect investment strategies and allocations.
In addition, endowment managers reported facing increased fees and expenses. With the war in Ukraine affecting energy prices and inflation taking hold, no doubt more uncertainty is on the horizon.
The NACUBO-TIAA study underscored once again the importance of endowments to the operations of colleges and universities. Nearly half of endowment spending was directed toward student financial aid with academic programs and research receiving 15%, endowed faculty positions garnering 11% and campus operations and maintenance receiving just under 10%.
The study also found that more than half of the endowments reported increased spending support for their institution’s operating budget.
Given the absolute necessity of a healthy endowment for just about any college or university, accurate and seamless fund management remains vitally important. That’s why at Fundriver, we’re continuing to ensure Balance is the best product for you and your team.