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Endowment assets fall 2.6% in 2016 fiscal year on negative returns, higher spending — report

U.S. and Canadian college and university endowment assets totaled $515 billion in the fiscal year ended June 30, down 2.6% from a year earlier, results of the NACUBO-Commonfund Study of Endowments showed.

The decline in endowment assets is well below the 2.5% growth rate in fiscal year 2015 and the 15% increase in fiscal year 2014.

Poor returns combined with higher spending rates reported by 74% of the 805 participating educational institutions in the survey were the primary drivers of the decline in aggregate assets, said William F. Jarvis, executive director, Commonfund Institute, during a conference call with reporters about the results of the latest survey.

The average one-year return of the universe as of June 30 was -1.9% net of fees, the worst average return since the -18.7% return in the year ended June 30, 2009.

The average net-of-fees annual return in prior years was 2.4% in the fiscal year ended June 30, 2015; 2014, 15.5%; 2013, 11.7%; 2012, -0.3%; 2011, 19.2%; and 2010, 11.9%.

The average one-year return as of June 30 for the 770 endowments that participated in both the 2016 and 2015 surveys was -2% net of fees, compared to 2.4% as of the same date in 2015.

Multiyear average annualized returns of the universe also were down sharply as of fiscal year-end 2016 with 5.2% for three years (2015, 9.9%); five years, 5.4% (2015, 9.8%); and 10 years, 5% (2015, 6.3%). All returns are net of fees.

“As in fiscal 2015, this year's long-term average returns figure is well below the median 7.4% that most institutions report they need to earn in order to maintain their institution's mission,” according to a joint NACUBO-Commonfund news release accompanying the release of the study's findings Tuesday.

The median spending rate increase was 8.1 percentage points among the 74% of respondents who a reported a higher spending rate in fiscal year 2016 than in the prior fiscal year.

Harvard University, Cambridge, Mass., remained the largest endowment in the NACUBO-Commonfund survey as of June 30, with reported assets of $34.5 billion, down 5.2% from the same date the prior year.

Yale University, New Haven, Conn., held on to the second spot with assets of $25.4 billion, down 0.6% in the year ended June 30, followed by The University of Texas System, Austin, with $24.2 billion, up 0.5%; Stanford University, Palo Alto, Calif., moved to fourth position from fifth with $22.4 billion in assets, up 0.8%; and Princeton University, Princeton, N.J., which dropped to fifth place from fourth with assets of $22.2 billion, down 2.5%.