Smaller endowments may have outperformed their larger counterparts in the short term, but the long-term advantage still lies with the giants.
For the second year in a row, smaller colleges and universities stole the show, with results of the 2024 NACUBO-Commonfund Study of Endowments revealing that institutions with assets under $50 million posted an average return of 13 percent, while the largest endowments — those over $5 billion — averaged 9.1 percent. This trend mirrors 2023, when smaller endowments also outperformed, thanks to their heavier allocations to public equities, which surged in both years.
But just as last year’s survey showed, the long-term story favors larger institutions. Over the trailing 10-year period, endowments over $5 billion returned an average of 8.3 percent annually, compared to 6.5 percent for those under $50 million. The gap widens further over 25 years, with the largest endowments averaging 8.5 percent versus 4.5 percent for the smallest.
This year’s study, which included 658 institutions managing a combined $873.7 billion in assets, revealed an average one-year return of 11.2 percent for fiscal year 2024, a significant improvement over 2023’s 7.7 percent. However, the three-year average return was 3.4 percent, due to 2022’s 8 percent loss. Over the past decade, 2021’s 30.6 percent return remains the standout, though two years of negative returns and two years of low single-digit gains highlight the volatility endowments face.
Commonfund Institute’s executive director George Suttle said that the returns for 2024 and 2023 “generally support institutions’ pursuit of their long-term mission objectives,” before adding: “Were the three-year average return of 3.4 percent to extend to longer periods, annual spending in support of critical needs would be severely challenged.”
The divergence in performance comes down to asset allocation. Smaller endowments leaned heavily into public equities, which accounted for a significant portion of their portfolios. Allocations to U.S. equities, in particular, rose to 13 percent in in 2024, up from 10.8 percent in 2022.
Larger endowments, meanwhile, continued investing in alternatives, which made up 55.7 percent of their portfolios. Private equity (17.1 percent), marketable alternatives (16.1 percent), and venture capital (11.7 percent) were the largest components. While these strategies have historically driven long-term outperformance, they lagged in 2024 as stocks surged.
According to Markov Processes International’s analysis of pension return projections, 2024 was marked by the significant outperformance of U.S. stocks. MPI founder Michael Markov noted that venture capital was the biggest drag on performance, with a 4.6 percent loss, followed by real estate, which declined by 4.2 percent. Meanwhile, private equity generated a 6.5 percent return in fiscal year 2024, aligning with its performance in previous years. Institutions withdrew $30 billion from their endowments in fiscal year 2024, a 6.4 percent increase over the previous year. Nearly half (48.1 percent) of that spending went to student financial aid, with 17.7 percent supporting academic programs. On average, endowments funded 15.3 percent of annual operating expenses.
The results of the annual survey come days after Princeton President Christopher Eisgruber rejected the idea that endowments are like savings accounts that schools can just dip into at any time. NACUBO President and CEO Kara D. Freeman shared the identical sentiment during Commonfund-NACUBO’s video presentation on the survey results. “These endowments are built for the long term. Endowments are not lump sum savings accounts,” she said.
