Mimi Lord, TIAA-CREF Institute
February 2006 |
During the fiscal year ended June 30, 2005, college and university endowments earned an average rate of return of 9.3%, matching their 10-year annualized rate of return on an equal-weighted basis. The 9.3% overall rate exceeded that of typical equity benchmarks (S&P 500, 6.3%; and Russell 3000, 8.1%) as well as the Lehman Brothers Aggregate Bond Index, 6.8%. Overall, endowments with significant diversification beyond domestic equities and fixed income fared the best, and especially if they had above-average allocations to such stellar performers as real estate, natural resources and private equity. International equities and fixed income also had a very strong year. Large endowments for the most part outperformed small endowments, due to their greater allocation to alternative investments and to their ability to earn considerably more on alternatives than their smaller counterparts.