College and university endowments expanded by 4% in fiscal year 2024 thanks to improved annual returns and gift-giving, according to the annual NACUBO-Commonfund Study. Over 650 nonprofit colleges, universities and related organizations participated.
A strong U.S. economy in fiscal year 2024—thanks to strong consumer spending, cooling inflation and a robust private and public market—helped institutions net an 11.2% one-year average annualized return on their investment portfolio. One-year returns in fiscal year 2023 topped out at 7.7%.
For two years in a row, the two cohorts of institutions boasting the lowest endowment sizes (under $50 million and between $51 million and $100 million) realized the highest one-year gains thanks to their larger average allocation to U.S. equities. However, the wealthiest institutions (endowments above $1 billion) boasted the highest 10-year average returns, a key measurement of overall endowment performance.
“Returns for FY24 as well as FY23 generally support institutions’ pursuit of their long-term mission objectives, while years when returns are flat or negative, like FY22, remind us that effective stewardship of endowment assets is a responsibility demanding constant diligence and commitment,” said George Suttles, executive director of the Commonfund Institute.
Additionally, new gifts to endowments totaled $15.2 billion in fiscal year 2024, an 18.1% increase over last year’s $12.7 billion. The average amount of new gifts also increased by 18% to $24.4 million.
The first half of fiscal year 2024 was dominated by calls for university divestment from organizations that benefit Israel’s military and increased investment portfolio transparency. However, NACUBO did not find a noticeable shift in institutions’ asset allocation, Suttles said. Likewise, the percent of endowments that factor ESG investing and other socially or environmentally conscious portfolio strategies have declined since fiscal year 2022.
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Well-performing endowments allowed institutions to withdraw more money and increase their average annual effective spending rate this past year. Student financial aid made up the largest funding distribution at 48%—nearly three times more than academic programs and research.
“Faculty and staff certainly benefit from this philanthropy, but students remain the primary beneficiaries, as the bulk of these resources is used to maintain student aid and affordability,” said Kara D. Freeman, president and CEO of NACUBO. “This is incredibly important work and demonstrates how short-sighted it would be to further tax these funds and divert them from their true purpose.”
Private colleges and universities enrolling at least 500 students and that possess assets exceeding $500,000 per student currently pay 1.4% tax on their net investment income, per the 2017 Tax Cuts and Jobs Act. However, new efforts in Congress propose increasing the tax anywhere from 14% to 21%.
Private institutions’ effective spending rate in fiscal year was a percentage point higher than their public counterparts at 5.2%.
“We hope that that Congress takes the opportunity to dial back the tax and recognize the good work colleges and universities are doing with the revenues from their endowments,” Freeman added.
Of the $873.7 billion in combined endowment assets of the 658 survey respondents, 86% of the total market value is concentrated among 144 organizations. That includes the Ivies, Ivy Plus institutions and all other public and private organizations reaping more than $1 billion in endowment assets.
