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Endowment returns flat for universities

After two strong years, college and university endowments lost ground slightly during the fiscal year ending last June 30, with their investments declining 0.3 percent on average, according to a new study.

U.S. stock markets have risen around 10 percent since then, and many global markets are also higher, so recent performance is likely stronger.

Endowments are the assets owned and invested by universities, who typically spend about 4 to 5 percent of their values annually to support things like financial aid, faculty salaries and other expenses – and then try to replenish the payouts through fundraising and investment returns.

The survey of 831 schools, conducted by NACUBO, a university business officers group, and investment adviser Commonfund, found that at the average university, the endowment kicks in about 9 percent of the operating budget.

But the figure is higher at richer universities, averaging more than 16 percent at institutions with endowments of at least $1 billion. The endowment provides about one-third of the budget at Harvard, whose endowment of $30.4 billion is the largest of any university in the world – though still well off its peak of nearly $37 billion before the recession hit.

To beat inflation (higher for the goods and services colleges purchase than for the overall economy) and replenish payouts to support university spending, endowments have needed to return about 7.4 percent annually, said Verne Sedlacek, president and CEO of Commonfund.

Larger endowments, over $1 billion, have managed that, averaging 7.6 percent over the last decade, the survey found. But endowments under $100 million have returned on average less than 6 percent (the average return for all schools in the survey was 6.2 percent).

Returns averaged 19.2 percent in fiscal 2011. Poor performances in international equities and hedge funds dragged down returns last year, the report found.

Overall, there are 71 U.S. universities with endowments higher than $1 billion, down from 76 in the survey a year ago.

Here are the top 10 university endowments, their 2012 value and the percentage change from 2011:

1. Harvard University, $30.44 billion, down 4.1 percent.

2. Yale University, $19.35 billion, down 0.1 percent.

3. University of Texas System, $18.26 billion, up 6.5 percent.

4. Stanford University, $17.04 billion, up 3.2 percent.

5. Princeton University, $16.95 percent, down 0.9 percent.

6. Massachusetts Institute of Technology, $10.15 billion, up 4.5 percent.

7. University of Michigan, $7.69 billion, down 1.8 percent.

8. Columbia University, $7.65 billion, down 1.7 percent.

9. Texas A&M University System, $7.64 billion, up 9.1 percent.

10. Northwestern University, $7.12 billion, down 0.9 percent.

Changes from 2011 reflect combined impact of fundraising, investment returns and spending out of the endowments.

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Follow Justin Pope at http://www.twitter.com/JustinPopeAP

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