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U.S. education endowments post losses in fiscal 2012

Manuela Badawy
Thursday, 25 Oct 2012 | 5:43 PM ET

NEW YORK, Oct 25 (Reuters) - U.S. college and university endowments returned an average loss of 0.3 percent for fiscal 2012, down sharply from a gain of 19.2 percent a year earlier, pressured by volatile international markets during the second quarter of the year, a preliminary study showed on Thursday.

Among the institutions that have reported thus far, the highest return earned for the fiscal year ended June 30, was 15.8 percent and the lowest was a loss of 9.5 percent, according to data gathered from 463 institutions sponsored by Commonfund Institute and the National Association of College and University Business Officers (NACUBO).

The individual institutions were not identified.

``Throughout that 12-month period there were times when foreign securities did much worse than the overall stock market, especially April to June quarter of 2012, when we saw a lot of concern about Greece. That stretch is probably what really hurt the overall results,'' Ken Redd, director of research and policy analysis at NACUBO, told Reuters.

Over the last five- and 10-year periods, endowments with assets over $1 billion generated the highest average returns, the 2012 NACUBO-Commonfund Study of Endowments showed.

The largest endowments, with assets above $1 billion produced the best positive returns at an average of 1.2 percent. Endowments with assets between $501 million and $1 billion returned an average of 0.2 percent, as did endowments with assets under $25 million.

Institutions with endowments between $51 million and $100 million reported the lowest returns, with an average loss of 0.1 percent. Institutions with assets between $25 million and $50 million returned a loss of 0.8 percent, while those with assets between $101 million and $500 million returned a loss of 0.5 percent.

``The data for fiscal year 2012 as well as for all longer periods confirm the historic pattern of outperformance by larger institutions, chiefly those with assets in excess of $1 billion,'' John Walda, NACUBO's president and chief executive, and John Griswold, executive director of the Commonfund Institute, said in a joint statement.

Institutions with endowments of all sizes reported widely varying asset allocation. The most significant trend over the past decade has been growth in allocations to alternative strategies, such as investments in hedge funds and private equity funds, especially among larger size institutions.

For institutions with assets over $1 billion, alternative strategies accounted for 59 percent of endowment assets; for those with assets between $501 million and $1 billion, they accounted for 49 percent.

Allocations to alternatives declined in size as fund sizes declines, reaching 14 percent among institutions with assets under $25 million.

Institutions with assets over $1 billion reported average allocations to domestic equities of just 10 percent. At the opposite end of the spectrum, endowments with assets below $25 million reported a 37 percent allocation.

Similarly, the two largest endowment groups reported average fixed income allocations of 11 and 9 percent, respectively, while the three smaller size groups had average fixed income allocations of 23 percent or more.

Allocations to international equities were fairly evenly spread, ranging from 18 percent to 15 percent.

Researchers are still gathering and tabulating data for the full study; final results will be released in late January, the statement said.