Key Takeaways
- • Large U.S. university endowments (valued over $1 billion) delivered average returns of 11.5% in fiscal 2025, marking their second consecutive year of double-digit gains and matching strong performance from FY24's 11.2% sector average.
- • Private equity and venture capital investments were primary performance drivers, with particular strength in growth-stage companies and pre-IPO positions that bolstered overall endowment valuations during the fiscal year ending in summer 2025.
- • Top-performing endowments included University of Wisconsin-Madison (16.2%), University of California fund pool (15.8%), University of Michigan (15.5%), and MIT (14%), demonstrating sustained outperformance across elite institutions.
- • Endowment withdrawals totaled $33.4 billion during FY25, representing an 11.0% year-over-year increase, reflecting heightened deployment of capital to support institutional operations and mission-related activities.
- • Incoming federal tax legislation targeting endowment assets poses a material headwind for future performance, with TIFF Investment Management flagging "The Endowment Tax" as an imminent policy development that will impact after-tax returns starting in 2026.
Summary
Large U.S. university endowments sustained robust momentum in fiscal 2025, posting average returns of 11.5% across institutions with assets exceeding $1 billion, according to analysis from TIFF Investment Management. This performance marks the second consecutive year of double-digit returns for the sector, building on FY24's 11.2% average annual returns as measured by the National Association of College and Business Officers-Commonfund endowment study. The consistency of strong returns reflects resilience in endowment portfolios despite volatile market conditions and evolving investment allocations.
Private equity and venture capital emerged as the primary catalysts for endowment outperformance in FY25. Within the private equity segment, investments concentrated in growth-stage companies and pre-IPO positions delivered outsized returns that significantly contributed to overall fund performance. This strategic allocation toward illiquid, higher-return asset classes demonstrates how large endowments continue to capitalize on their structural advantages—extended time horizons, substantial capital bases, and institutional expertise—to pursue returns exceeding public market benchmarks.
Performance dispersion among major endowments was notable. MIT led the elite university cohort with a 14% return, while the University of Wisconsin-Madison posted the highest reported rate at 16.2%, followed by a University of California fund pool at 15.8% and the University of Michigan at 15.5%. These results underscore differentiation in portfolio construction and manager selection across peer institutions, with outperformance correlating to concentrated exposure to high-conviction private markets positions.
Endowment distributions to support institutional operations increased materially in FY25, with total withdrawals reaching $33.4 billion—an 11.0% year-over-year increase. This elevated deployment reflects both strong absolute returns enabling greater spending and heightened institutional funding needs across research, financial aid, and operations.
Looking forward, endowment performance faces a structural headwind: incoming federal tax legislation targeting endowment assets. TIFF's analysis flagged "The Endowment Tax" as an imminent policy development, signaling that after-tax returns will compress starting in 2026. This regulatory shift will materially alter the after-tax return calculations for institutional investors and boards evaluating endowment performance going forward.
Private equity and venture capital emerged as the primary catalysts for endowment outperformance in FY25. Within the private equity segment, investments concentrated in growth-stage companies and pre-IPO positions delivered outsized returns that significantly contributed to overall fund performance. This strategic allocation toward illiquid, higher-return asset classes demonstrates how large endowments continue to capitalize on their structural advantages—extended time horizons, substantial capital bases, and institutional expertise—to pursue returns exceeding public market benchmarks.
Performance dispersion among major endowments was notable. MIT led the elite university cohort with a 14% return, while the University of Wisconsin-Madison posted the highest reported rate at 16.2%, followed by a University of California fund pool at 15.8% and the University of Michigan at 15.5%. These results underscore differentiation in portfolio construction and manager selection across peer institutions, with outperformance correlating to concentrated exposure to high-conviction private markets positions.
Endowment distributions to support institutional operations increased materially in FY25, with total withdrawals reaching $33.4 billion—an 11.0% year-over-year increase. This elevated deployment reflects both strong absolute returns enabling greater spending and heightened institutional funding needs across research, financial aid, and operations.
Looking forward, endowment performance faces a structural headwind: incoming federal tax legislation targeting endowment assets. TIFF's analysis flagged "The Endowment Tax" as an imminent policy development, signaling that after-tax returns will compress starting in 2026. This regulatory shift will materially alter the after-tax return calculations for institutional investors and boards evaluating endowment performance going forward.
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