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Bloomberg
US college endowments suffered their biggest loss since the financial crisis, dragged down by global stocks, hedge funds and natural resources, according to an industry survey released Tuesday.
The 1.9 percent average loss reported by the National Association of College and University Business Officers and money manager Commonfund in Wilton, Connecticut, for the year ended June 30, compared with a nearly 4 percent gain, with dividends, in the S&P 500 Index. In the prior 12-month period, schools saw a 2.4 percent return on average.
The 10-year average return fell to 5 percent as a result of the tepid performance, well below the median 7.4 percent most say they expect to earn over time, according to the report. Yet 74 percent of respondents increased the amount spent from their endowments to support their institution. The average spending rate was 4.3 percent, up slightly from 4.2 percent a year earlier.
“These below market long-term returns may make it even harder for institutions to maintain spending rates,†John D. Walda, Nacubo’s president, said on a conference call.
RISKY ALTERNATIVES
Endowments were hampered by investments in non-US equities, which declined 7.8 percent, energy and natural resources, which lost 7.5 percent, and commodities and managed futures, which were down 7.7 percent.
Wealthier schools’ performance was dragged down by their larger allocations to riskier alternatives such as hedge funds. Hedge funds were among the worst performers for endowments of all sizes, with a 4.0 percent loss.
Endowments with more than $1 billion declined 1.9 percent, the same as the average.