Endowment Expectations

College and university endowments demonstrated robust growth in fiscal year 2025, with the 657 institutions participating in the latest NACUBO-Commonfund Study of Endowments reporting average investment returns of 10.9% for the year and 10% over the preceding three years. These returns substantially exceeded longer-term historical averages, driven significantly by elevated public market performance. The strong returns expanded total endowment assets across the participating cohort, though performance variation persists year to year, prompting institutional investors to evaluate results using rolling three-, five-, and ten-year benchmarks.

Concurrent with asset growth, participating institutions increased aggregate endowment withdrawals to $33.4 billion in FY25, up from $30.1 billion in FY24. This expansion in spending reflects institutional strategies to address rising operational costs and enhance educational accessibility across their campuses. Most colleges and universities employ structured spending formulas using moving averages—typically spanning three, five, or twelve quarters—applied against prior-year endowment balances. This approach provides stability and predictability in revenue allocation, enabling institutions to manage inflationary pressures and maintain consistent funding commitments despite annual market fluctuations.

The endowment landscape remains heterogeneous. The median endowment among study participants was $253.6 million, while roughly 26% of institutions managed endowments below $100 million, highlighting significant resource disparities. The largest endowments—held by institutions including Harvard University, Yale University, the University of Texas System Office, Stanford University, and Princeton University—command outsized attention in public discourse, though they represent a fraction of the broader higher education institutional base.

A core tension shapes endowment management: most donors structure gifts to perpetuate indefinitely, creating a legal and fiduciary obligation for investment committees to sustain capital in perpetuity while funding current institutional needs. Investment committees define risk tolerance and return expectations to reconcile this dynamic, relying on spending formulas that isolate payouts from short-term market volatility. Looking forward, mega-endowment performance is increasingly influenced by structural market shifts and governance challenges, as institutional investors adjust portfolio construction strategies to navigate both opportunity and uncertainty in 2025 and beyond.