U.S. college and university endowment assets totaled $516 billion at the end of the fiscal year ended June 30, up 15% from a year earlier, results of the NACUBO-Commonfund Study of Endowments showed.
The 25 largest endowments held an aggregate $270.4 billion, up 16.4% in the 12-month period. The largest endowments accounted for 52.4% of the total assets of the full universe of 832 American colleges that responded to the jointly sponsored survey, results of which were released Thursday.
Assets of the 792 institutions that participated in the NCSE survey in both 2014 and 2013 totaled $513.3 billion at the end of the fiscal year, up 15.2% from the previous year.
Harvard University, Cambridge, Mass., remained the largest U.S. endowment with $35.9 billion, up 11% from the end of the previous fiscal year.
University of Texas System, Austin, nudged Yale University, New Haven, Conn., out of second place with assets up 24.3% to $25.4 billion, while Yale's gain of 15% to $23.9 billion placed it third, ahead of Stanford University, Palo Alto, Calif., which once again occupied fourth place, with assets up 14.8% to $21.4 billion. Princeton (N.J.) University held on to the fifth position, with assets up 15.4% to $21 billion in the year ended June 30.
Investment outsourcing has become increasingly important for endowments, with nearly half of survey respondents reporting the use of outsourced investment programs, said William F. Jarvis, managing director, Commonfund Institute, Wilton. Conn., during a conference call about the NCSE survey results on Wednesday.
Overall, 43% of NCSE survey respondents said their college or university had substantially outsourced the investment of the endowment pool, compared to 40% in the year ended June 30, 2013, and 38% the previous fiscal year.
Not surprisingly, Mr. Jarvis said, outsourcing is much more prevalent among small and midsize institutions, as follows:
- less than $25 million, 59%;
- $25 million to $50 million, 52%;
- $51 million to $100 million, 54%;
- $101 million to $500 million, 42%;
- $501 million to $1 billion, 21%; and
- more than $1 billion, 12%.
The fiscal year ended June 30 was “a very good year, with rising stock markets giving a good tailwind to endowment returns, well above long-term averages,” said John S. Griswold, executive director, Commonfund Institute, during the conference call.
The average investment return of the full NCSE universe for fiscal year 2014 was 15.5%, an increase of 380 basis points over the 11.7% average return the prior year. The universe's average return in fiscal year 2012 was -0.3%.
Average annualized returns for the whole NCSE endowment universe over longer time periods ended June 30 were 11.7% for five years and 7.1% for 10 years.
For comparison, annualized returns of the S&P 500 index for the one-, five- and 10-year periods ended June 30 were 24.5%, 18.8% and 7.8%; the MSCI ACWI World index, ex-U.S., 23.8%, 11.7% and 7.2%; and the Barclay Capital U.S. Aggregate Bond index, 4.4%, 4.9% and 4.9%.
The largest endowments — those with assets of more than $1 billion — had the best average one-year return as of June 30 at 16.5%, substantially higher than the returns of smaller endowment categories, which were separated by just 60 basis points from best to worst.
Returns of those smaller endowment tiers were:
- $501 million to $1 billion, 15.8%;
- $101 million to $500 million, 15.5%;
- $51 million to $100 million, 15.2%;
- $25 million to $50 million, 15.2%; and
- less than $25 million, 15.5%.
The dollar-weighted asset allocation of the full universe of educational institutions as of June 30, 2014, was little changed from a year earlier: domestic equities was at 17% vs. 16% in 2013; international equities, 19% vs. 18%; fixed income, 9% vs. 10%; alternative investments, 51% vs. 53%; and short-term securities/cash/other, 4% vs. 3%.