We review the current state of endowments, focusing on returns based on asset allocation and endowment size, using information from the 2018 NACUBO-TIAA Study of Endowments® (NTSE), covering July 1, 2017–June 30, 2018, published by the National Association of College and University Business Officers (NACUBO).

*NACUBO stands for the National Association of College and University Business Officers. Used with permission. Reprinted from 2018 NACUBO-TIAA Study of Endowments. ©2018 National Association of College and University Business Officers (NACUBO). 1110 Vermont Ave, NW, Washington DC, 20005

The study gathers data from 802 U.S. colleges and universities regarding their investment programs. Our National Practice Group highlights these key findings:

  • Average effective spending rate remained 4.4%
  • Endowment returns averaged 8.2% (net of fees)
  • U.S. Equities were the best performing asset class

Overall the steady 4.4% spending rate is reassuring for the long term viability of these endowments; however, we remain concerned with the low investment returns demonstrated over the long term, with the 10 year average sitting at 5.8%. According to past survey results, endowments report on average they require an annual return of 7.2% to maintain their purchasing power after spending, inflation, and investment management costs. The fact that the 10-year average return, described as “mission-critical” by the industry, increased from 4.6% in FY2017 is promising, but nevertheless is still short of the level that would preserve purchasing power for these pools of assets.

The investment objective of an endowment may vary depending on the overall mission of an organization. However, the underlying fundamentals are typically the same; that is, the investment portfolio is generally expected to provide a modest source of ongoing revenue and income, while preserving purchasing power, to help support the operating budget of the organization and any donor‑designated programs. 

In these reports and commentaries, we discuss how the investment programs in the survey progressed toward those goals.


Market Update: Endowments & Foundations 2018 in Review

NACUBO Full-Year Report: 2018