The return for fiscal 2021 was the highest in the history of the study. As such, the performance differential between fiscal 2021 and fiscal 2022 was the biggest in the study's history.
For the three-, five- and 10-year periods ended June 30, 2022, the endowments returned an average annualized 5.5%, 6.2% and 8.1%, respectively.
For this latest study, Commonfund and NBOA compiled date from 216 independent schools representing about $11.4 billion in combined endowment assets. (The fiscal 2021 study involved 215 independent schools with $13.8 in combined endowment assets.) The schools are private, non-profit institutions enrolling students from prekindergarten through 12th grade.
By size, school endowments with assets more than $50 million reported an average net return of -10.6% (down from 29.3% in the prior fiscal year); those with assets between $10 and $50 million reported a net return of -11.3% (down from 25.3%); while those with assets less than $10 million reported a -12.6% net return (down from 21.2%).
The average asset allocations for these endowments as of June 30 was 32% U.S. equities, 31% alternative strategies, 18% non-U.S. equities, 14% fixed income and 5% short-term securities/cash/other. (The corresponding average asset allocations in fiscal 2021 were 34%, 29%, 21%, 13% and 3%, respectively.)
The study also indicated that some 11% of respondents report they were seeking to include investments that ranked high on ESG criteria, up from 10% in the prior fiscal year.
"The steep rise in inflation not only raises schools' operating costs, it is also the main cause of the decline in financial markets, which erodes the long-term assets on which endowed schools depend to support their annual budgets," said George Suttles, executive director of Commonfund Institute, and Jeffrey Shields, president and CEO of the National Business Officers Association, in a joint statement. "Schools that had strong investment returns over the previous decade and that managed expenses prudently should have a buffer, but a prolonged market downturn or an economic recession would greatly heighten the pressure on the (pre-kindergarten to grade 12) independent school community."