(January 31, 2012) — College and university endowments in the United States have made strong gains in 2011, but are still struggling to make up their losses suffered during 2008 and 2009, according to a newly released report by the National Association of College and University Business Officers (NACUBO) and Commonfund.
The data — compiled from 823 colleges and universities in the US — shows that institutions’ endowments returned an average of 19.2% for the 2011 fiscal year, up from 11.9% in fiscal year 2010.
Nevertheless, NACUBO President John Walda said 47% of the institutions have endowment market values below what they reported in 2008.
The largest endowment of any US institution: Harvard University, with $31.7 billion, up from $27.5 billion in fiscal year 2010. Following Harvard was Yale with a $19.4 billion endowment.
“The study reflects the heightened importance that institutions are paying to liquidity, cash reserves, and investment policies,” William E. Jarvis, managing director of the Commonfund Institute, told aiCIO following NACUBO’s 2010 fiscal year results. “The changes you’re seeing with endowments reflects the fact that the endowment model is alive and well, despite commentators over the last few years who have questioned the model,” he said, noting that while endowments are still below their pre-crisis peaks in terms of size, highly diversified portfolios have enabled endowments around the country to weather the financial storm.
The highlight of the NACUBO-Commonfund Study, industry sources believe, is the importance of investment policies to counter the temptation of external pressures in addition to the human psychology of investing. “The downturn was no blessing in disguise. It was a catastrophe,” Jarvis said last year, adding that with that catastrophe came the lesson that institutions should stick to highly diversified strategies over the long-term. “You need investment policies written down to be a guide to get you through stressful times.”