College and university endowments posted dizzying returns in fiscal year 2021, with endowments of all sizes increasing by at least 20%, according to a new study. The average university endowment size increased 35% to $1.1 billion, and the median endowment size reached $200 million.

The study, conducted annually by the National Association of College and University Business Officers and the Teachers Insurance and Annuity Association of America, surveyed 271 public colleges and universities and their affiliated foundations, as well as 442 private institutions and seven nonprofit organizations. lucrative non-collegiate. Together, these institutions had $821 billion in assets in fiscal year 2021, which began July 1, 2020 and ended June 30, 2021.

About 19% of institutions reported an endowment worth more than $1 billion, according to the study. Together, these institutions captured 83.7% of the total assets reported by the 720 institutions in the study. One in 10 institutions reported their endowment was worth between $501 million and $1 billion, and more than half (57%) of institutions reported an endowment between $51 million and $500 million. About 13% of institutions said their endowment was valued at $50 million or less.

The institutions surveyed posted a median return of 30.1% in fiscal year 2021, compared to a median return of 1.8% in fiscal year 2020.

A strong U.S. market in fiscal 2021 generated strong returns for endowments of all sizes, said Ken Redd, director of research and policy analysis at NACUBO.

“For large endowments, private equity and venture capital were really driving returns,” Redd said. “For the smaller endowments, US equities drove their performance.”

Endowments worth $1 billion or more invest more of their money in tradable alternatives — including hedge funds — and private equity than in any other individual asset class. Private institutions also invest more in these asset classes than public institutions, according to the study. Small endowments, worth $100 million or less, on average invest 38-40% of their funds in U.S. equities and 23-32% in fixed-income assets.

These asset allocations are likely to change this year as rising interest rates and inflation become a bigger concern, the study notes.

Ties between alumni and directors give wealthy institutions access to some of the most successful private equity and hedge funds, said Charlie Eaton, assistant professor of sociology at the University of California, Merced, and author of the delivered. Bankers in the Ivory Towerwhich explores the relationship between big finance and inequality in higher education.

“Not only are they investing larger shares of their portfolio in private equity funds and hedge funds, but they are also investing in hedge funds and private equity funds which tend to generate the highest rates of return. high,” Eaton said. “It’s really not a viable strategy for a college or university with a small endowment to grow its endowment. There is simply no way to match what elite institutions are doing.

The yield gap between the largest endowments – worth $1 billion or more – and the smallest, worth $25 million or less, was 13 percentage points, according to the report. ‘study. Growing wealth inequality among institutions of higher learning reflects the wealth gap between American individuals, Redd said.

“The wealthiest people, especially during the pandemic, have gotten even wealthier,” Redd said. “Unfortunately, this meant that people with less wealth also saw negative effects. I think this societal trend is playing out in higher education institutions as well as other institutions.

While the growing endowments are good news for their institutions, very few students actually benefit from the high returns, Eaton said.

“America’s wealthiest schools will continue to be the last bastion of debt-free higher education. Harvard, Princeton, Yale, Stanford and a handful of others have used their endowment booms to increase financial aid to the students they enroll to the point where over 90% of their students don’t borrow at all” , Eaton said. “It would be more encouraging if these schools also used their endowment booms to enroll more students.”

Harvard, Yale, Stanford and Princeton universities, which have four of the five largest endowments, each enroll fewer than 10,000 undergraduate students. Even fewer of those students come from low-income backgrounds, Eaton said.

“During the last years, [the University of California] Berkeley enrolled more low-income students than the entire Ivy League combined. Economist Raj Chetty and colleagues have shown that 38 top private colleges and universities – many with large endowments – enroll more students from the top 1% of the income spectrum than from the bottom 60% combined” , Eaton said. “For endowment growth to benefit students, we would need elite institutions with large endowments to enroll many more undergraduates, and many more undergraduates from less advantaged backgrounds. “

Spending rates have remained more or less constant throughout fiscal 2021 despite the growth in endowments. Institutions with endowments worth more than $1 billion spent 4.7% of their endowments, down from 4.5% in FY2020. Colleges with endowments worth between $101 million and $1 billion spent 4.6% in fiscal year 2021, compared to 4.5% in fiscal year 2020. The smallest endowments – those worth $100 million dollars or less – spent 4.1% in fiscal year 2021, compared to 4.5% in fiscal year 2020.

A large portion of these expenditures – 47% – go to funding financial aid. Another 15% goes to academic programs and research, 11% is reserved for staffed faculty positions and 9% pays for the operation and maintenance of campus facilities, according to the study.

Staffing managers generally keep spending rates constant. Managers are more concerned with five-year, 10-year and 20-year average returns than one-year returns, according to Redd.

“Endowments try to focus on much longer-term trends,” Redd said. “A good year is obviously good, and a bad year is obviously not so good, but university endowment managers try not to focus too much on individual years.”

For the first time this year, NACUBO asked institutions if they received donations for their endowments that were specifically earmarked for diversity, equity and inclusion initiatives. More than half – 65% of respondents – said they had received endowment funds for DEI in fiscal year 2021, according to the study.

Institutions have also become more transparent about the racial and gender makeup of their endowment managers over the past fiscal year, said Robert Raben, executive director of the Diverse Asset Managers Initiative.

“Harvard, University of California, Duke and Georgetown are taking very explicit action, reaching out to women and people of color and talking about what they’re doing,” Raben said.

Only 8% of institutions have explicit policies for engaging with asset management companies owned by women and diverse interests, Redd said. A few wealthy institutions have continued to keep the makeup of their endowment managers opaque, according to Raben.

“Stanford and Amherst are unhappy to talk about it and really don’t like being put in a position to have a conversation about women and people of color, but they’re probably stepping up,” Raben said. “It happens a lot in life – people move on their own terms, and that’s fine.”

It’s too early to tell if colleges and universities can expect more good news at the end of fiscal year 2022, but that’s unlikely to match the strong returns they’ve seen over the past year. fiscal 2021, according to Redd.

Lately, Redd said: “The financial markets have been very choppy for two reasons: first, inflation. And two: the threat of possible military action between Russia and Ukraine. We know that the Standard & Poor’s 500, which is the main index followed by most schools, is generally down. So I guess in general the endowments are also a bit down this current year, but we’ll know more about that in our next data collection.

Top 25 endowments by value, fiscal year 2021
Name of the institution Endowment funds for fiscal year 2021 (in thousands of dollars) Endowment funds for fiscal year 2020 (in thousands of dollars) Change in market value (percent)
Harvard University 51,900,662 40,575,027 27.9
University of Texas System 42,906,847 31,958,313 34.3

Yale University

42,282,900 31,201,700 35.5
Stanford University 37,800,000 28,948,000 30.6
Trustees of Princeton University 37,697,509 26,558,643 41.9
Massachusetts Institute of Technology 27,527,204 18,495,905 48.8
Trustees of the University of Pennsylvania 20,523,546 14,877,363 38.0
Notre Dame University 18,074,543 11,962,820 51.1
The Texas A&M University System and Associated Foundations 18,028,267 13,594,482 32.6
University of Michigan 17,022,683 12,860,473 32.4
Northwestern University 14,958,441 10,926,510 36.9
Trustees of Columbia University 14,349,970 11,257,021 27.5
University of Washington 13,536,003 8,420,497 60.8
duke university 12,692,472 8,474,071 49.8
Emory University 11,031,029 7,936,988 39.0
Vanderbilt University 10,928,512 6,917,371 58.0
University of Virginia 10,532,651 7,255,701 45.2
Johns Hopkins University 9,315,279 6,750,092 38.0
Dartmouth College 8,484,189 5,975,180 42.0
rice university 8,061,260 6,163,926 30.8
University of Southern California 8,008,443 5,769,643 38.8
Ohio State University 6,814,413 5,287,131 28.9
brown university 6,520,175 4,377,466 48.9
University of Pittsburgh 5,647,017 4,172,380 35.3
New York University 5,574,000 4,323,652 28.9