The National Association of College and University Business Officers (NACUBO) and Commonfund have released their annual study of endowments, with some interesting information. The average institution reported a return of 11.7% after fees. Larger institutions tended to have better performance, with institutions that have over $1 billion in assets reporting returns of 16.2%, in part because alternative strategies reported the highest returns. Alternatives (real estate, hedge funds, currencies, commodities, etc.) tend to have high risk, high minimum investments, and long-term lockups, making it difficult for smaller institutions to invest in them.
You can see the market value of different endowments here. In general, the richer the school, the more financial aid it can offer, so if you are looking at colleges, take a look at the list, too.
I’m hoping that in my lifetime I see a university with a massive endowment commit to using some of it to offset student costs. And I don’t mean just a nominal amount, I’m talking making it the number one priority. Right now they use it for capital improvement projects or other spending projects, or just to let it grow to see how big they can make the number get, then turn around and raise tuition 10%, pleading that they have to do so just to break even from a cost perspective. Many institutions have many times over what they truly need in terms of a comfortable endowment.
I hear ya. After a lot of soul searching, I decided to stop donating to my alma mater. I’m happy with them, I think they spend the money well, but they don’t need any more. There’s no good ROI on donations to these wealthy schools.