College and university endowments earned an average of 11.9 percent during fiscal year 2010 -- a big increase over fiscal year 2009, when they lost an average of 18.7 percent. But the average three-year return is still in the red -- endowments lost an average of 4.2 percent over the last three years.

Those are the figures reported in a new study of 850 U.S. colleges and universities jointly conducted by the National Association of College and University Business Officers and the Commonfund Institute. (A press release about the study is available here.)

Smaller endowments did about as well as larger ones. Endowments of less than $25 million reported an 11.6 percent return in FY10, compared to 12.2 percent in the highest cohort -- endowments larger than $1 billion.

Overall, asset allocations remained about the same as in the previous year:

• 15 percent in domestic equities (down from 18 percent in FY09)
• 12 percent in fixed income (down from 13 percent)
• 16 percent in international equities (up from 14 percent)
• 52 percent in alternative strategies like distressed debt, private equity, energy and natural resources, and commodities and managed futures (up from 51 percent)
• 5 percent in short-term securities/cash/other (up from 4 percent)

Not surprisingly, smaller endowments tended to be more heavily skewed toward liquid, domestic investments.

The average spending rate for all endowments was 4.5 percent, but the highest spending rate, 5.7 percent, was found in the cohort that included endowments of $501 million to $1 billion. The smallest endowments also spent the least -- endowments of less than $25 million reported a spending rate of only 3.5 percent. 

The full press release about the NACUBO-Commonfund study is here.

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