Financial Management |
Article by Mary Kay Markunas
From the May/June 2019 Net Assets magazine
Independent school endowments rose an average of 7.4 percent net of fees in fiscal 2018, according to data from 223 participating schools in the 2018 Commonfund Benchmarks Study of Independent Schools. The returns, which cover the period from July 1, 2017 to June 30, 2018, represent a decline from 11.8 percent in fiscal 2017, but an increase over fiscal years 2016 and 2015, when respective returns were -0.8 percent and 2.3 percent. The study was conducted by the Commonfund Institute and NBOA.
Participating schools — which included 145 day schools, 35 day/boarding schools, 26 boarding/day schools and seven boarding-only schools — represented some $12 billion in combined endowment assets in fiscal 2018. Results are segmented into three cohorts based on size: endowment assets greater than $50 million (average return of 8.2 percent); assets between $10 million and $50 million (average return of 7.4 percent); and assets under $10 million (6.2 percent).
The average annual effective spending rate was 3.8 percent of endowment for all schools, up from 3.7 percent in fiscal 2017. Schools in the largest endowment cohort spent at the highest rate (4 percent). The most frequently used methodology (for 69 percent of schools) was to spend a percentage of a moving average of endowment value. Schools reported an average 7.3 voting members of investment committees, the majority of whom were investment professionals.
Asset allocations changed little in fiscal 2018 compared to the previous year.
The study also includes an in-depth analysis of 10 years of survey data from Commonfund and NBOA. Selected highlights from the longer-term returns:
Expanded data involving the different cohorts and more analysis of long- and short-term returns, asset allocation, strategies, fund flows and more are available in the full report.
Independent School Endowments Favor Alternative Investments (news item, March 2019)
Stormy Markets, Steady Institutional Investors (web-only, January 2019)
Coveting Thy Neighbor’s Returns (web-only, February 2019)
Business Intelligence: Back in Black: In 2017, Endowments Made up for Lost Years (May/June 2018)
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