College Endowments’ Returns Plunge, Deepening Financial Squeeze

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College endowments posted the lowest returns in four years, adding to a financial crunch that hit after the pandemic left dorms empty and forced schools to ratchet up spending on measures to combat the spread of Covid-19.

Average investment gains were 1.8% for the 12 months through June, compared with 5.3% a year earlier, according to an annual study released Friday by TIAA and the National Association of College & University Business Officers. Schools typically aim for at least 7.5% to offset inflation and spending for expenses including financial aid and professor salaries.

The poor endowment results came at a time when college finances have been especially constrained. Schools have had less money come in because of lower enrollments, leading to fewer students living in dorms and eating in dining halls, yet they are also spending more on Covid-related expenses such as testing. Fundraising for the period was essentially flat.

College Endowments’ Returns Plunge, Deepening Financial Squeeze

“This financial impact has been unprecedented,” said Doug Chittenden, executive vice president and head of client relationships at TIAA. “In the past, challenges have typically hit either the revenue or the expense side. This pandemic has hit both simultaneously.”

The 705 institutions in the report spent a combined $23.3 billion from their endowments in the period, a 4% increase from a year earlier. They held $637.7 billion at the end of the fiscal year, 80% of which was owned by schools with at least $1 billion of assets.

©2021 Bloomberg L.P.

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