College, university endowments report losses on their most recent balance sheets

A year ago, the nation’s college and university endowments shook off a pandemic-driven market slump to score impressive growth to support their schools’ academic missions.

This time, in fiscal year 2022, the story was the same, say two organizations that closely monitor those funds — only the order was reversed, and things ended on the downside.

Endowments, including those in Western Pennsylvania, on average declined in value by about 4% by the end of the fiscal year that ended June 30 with returns at minus 8%, according to the 2022 NACUBO-TIAA Study of Endowments, released Friday.

The fiscal year that began last July 1 with favorable market conditions and increased gifting hit turbulence halfway through.

“In the fiscal year’s first half, positive economic tailwinds drove equities higher through December of 2021,” Lynne Schaefer, interim president and CEO of the National Association of College and University Business Officers (NACUBO), told reporters in a briefing. “This was followed by a crushing combination of inflationary pressures and other factors that forced most major investment indexes down sharply by the fiscal year’s close in June of 2022.”

It ended up being the most challenging period for equity and fixed income assets in recent years, though the largest endowments fared somewhat better, officials said. They called it a dramatic reversal from the 30.6% overall average return in fiscal year 2021.

“The 2022 fiscal year was truly a tale of two markets,” said Jill Popovich, senior managing director and regional general manager at TIAA.

The endowment study released Friday involved responses from 678 institutions, which were ranked by market value.

In Western Pennsylvania, the highest ranked in the study was the University of Pittsburgh, $5.53 billion, down 2.09% (26th).

Others in the region included:

• The Pennsylvania State University, $4.61 billion, down 0.11% (31st);

• Carnegie Mellon University, $3.86 billion, down 2.79% (33rd);

• West Virginia University Foundation, $875.1 million, up 9.77% (151st);

• Duquesne University of the Holy Spirit, $564.7 million, down 9.97% (205th).

Harvard University topped all others nationally in the study at $49.44 billion, down 4.73%. Number two in size nationally was the University of Texas System at $42.67 billion, down by 0.56%.

In Pennsylvania, the largest was the Trustees of the University of Pennsylvania at $20.72 billion, up 0.98% (7th).

A sampling of other Western Pennsylvania schools included:

• Allegheny College, $264.3 million, down 8.57% (304th);

• Westminster College, $132.6 million, down 4% (426th);

• Washington & Jefferson College, $131 million, down 14.01% (430th);

• Foundation for Indiana University of Pennsylvania, $72.1 million, down 7.98% (533rd).

According to the American Council on Education, an endowment is an aggregation of assets invested by a college or university to help fund its educational and research mission in perpetuity.

Schools have various formulas, often spread over multiple years, for determining what share to spend in a given year. Endowments fund scholarships, endow professorships, support athletic programs and other campus endeavors that are not covered by tuition or annual gifts.

Study respondents this year reported spending a total of $25.85 billion from their endowments in fiscal year 2022, up from $23.89 billion reported by respondents in the fiscal year 2021’s survey, officials said.

Of the $25.85 billion that endowments provided in fiscal year 2022, 46% went to student financial aid, which was similar to the previous year.

More than half of the endowments were under $250 million, yet 84% of the total market value was held by endowments with more than $1 billion in assets.

Collectively, the institutions in the survey reported market value of $807 billion.

The largest endowments took less severe losses, down 3.8%, versus declines for most smaller endowments that averaged declines of 9.6%.

Study organizers explained a likely reason for those different outcomes.

“Smaller endowments tend to allocate far more to public equities and public fixed income, but both asset classes struggled in fiscal year 2022 as interest rates increased,” officials from NACUBO and TIAA explained. “In contrast, large endowments with extensive exposure to private markets were better able to weather the volatility.”

As was the case with shifts in market value, larger endowments saw less disappointing returns, minus 4.5%, while endowments less than $25 million saw returns of minus 11.5%.