The improved investment climate in 2010 had positive ramifications for many colleges and universities who have had their returns hurt in recent years. The 850 U.S. colleges, universities and affiliated foundations participating in the 2010 NACUBO-Commonfund Study of Endowments® (NCSE) show that these institutions’ endowments returned an average of 11.9 percent (net of fees) for the 2010 fiscal year (July 1, 2009 -  June 30, 2010). This represented a sharp improvement over the average -18.7 percent return (net of fees) reported in last year’s Study for fiscal year 2009.

With the exception of real estate, returns were positive for all major asset classes. Last year only fixed income showed a positive return. The highest return this year came from domestic equities, which gained 15.6 percent. This was followed by fixed income, at 12.2 percent; international equities, at 11.6 percent; alternative strategies, at 7.5 percent; and short-term securities/cash/other, at 2.7 percent.

How did alternative strategies perform" Within this category, distressed debt led all allocations with a return of 24.6 percent, followed by private equity, at 14.1 percent, and energy and natural resources, commodities and managed futures, at 13.2 percent. Marketable alternatives - a category that includes hedge funds, absolute return, market neutral, long/short, 130/30, event-driven strategies and derivatives - returned 9.9 percent. Only the sub-asset class of private equity real estate (non-campus), which returned -15.8 percent, showed a negative return in this year’s Study.

Asset Allocation

Allocations to major asset classes in this year’s Study were as follows:

Domestic equities – 15 percent (down from 18 percent in FY2009)

Fixed income – 12 percent (down from 13 percent)

International equities – 16 percent (up from 14 percent)

Alternative strategies – 52 percent (up from 51 percent)

Short-term securities/cash/other – 5 percent (up from 4 percent)

Socially Responsible Investing

Of the 850 Study participants, 161 reported having some form of social investing policy - down moderately from last year’s 178 out of 842 Study participants. Of these 161 institutions, 45 percent screen all of their portfolios (versus 55 percent last year), while 44 percent screen part of the portfolio (up from 34 percent last year). Participating institutions most frequently screen for investments that may involve tobacco, geopolitical/location-specific concerns, alcohol, abortion, gambling, pornography, and armaments/weapons-related issues.