Earlier this year, in partnership with the National Association of College and University Business Officers (NACUBO), Commonfund released the 2024 NACUBO-Commonfund Study of Endowments (NCSE). The Study examines investment performance, governance and management practices at hundreds of U.S. higher education endowments and related foundations over the July 1, 2023 – June 30, 2024, fiscal year (FY24).
Following the release of this annual Study, Commonfund takes a deep dive into results from various peer groups that are not part of the standard cohorts presented in the full report. This comparative analysis of the 10 participating historically black colleges and universities (HBCUs) and the 658 total respondents from the full NCSE is one of the custom cohorts we looked at this year.
HBCUs accounted for $2.6 billion of the reported $873.7 billion in assets represented in the full FY24 Study, with an average endowment size of $255.1 million vs. $1.3 billion respectively.
THE TOP-LINE RESULTS
Performance
Returns were positive across both the HBCUs and the total NCSE respondents in FY24 and across all time horizons—in line with FY23. The 10 HBCUs participating in this year’s Study reported a 1-year average return of 9.2 percent vs. 11.2 percent for total NCSE respondents, compared to the analysis done in FY23 when average returns were reported as 5.7 percent and 7.7 percent respectively. Note: There was not enough data to report longer-term returns for the HBCU group.
Asset Allocation
HBCUs participating in the FY24 NCSE reported significant over-weight to U.S. Equities and Fixed Income that were nearly double those of total NCSE respondents (24.1 percent vs. 13.0 percent and 20.6 percent vs. 10.2 percent respectively). HBCUs also reported an overweight of 22.1 percent to Private Equity investments vs. 17.1 percent for total NCSE respondents. Notable underweights, compared to total NCSE respondents, were reported by HBCUs in marketable alternatives (6.0 percent vs. 16.1 percent), private venture capital (2.9 percent vs. 11.7 percent) and global equities (3.5 percent vs. 8.3 percent) .
Spending
Institutions participating in the FY24 NCSE reported withdrawing more from their endowments than they did in FY23 and the average effective spending rate reported by institutions also increased. HBCUs reported an annual effective spending rate of 3.2, compared to 3.0 percent in FY23, while total NCSE respondents reported a 4.8 percent spend for the same time period vs. 4.7 percent the previous year. Looking at spending policy, the most frequently reported spending methodology being used is a percentage of a moving average. All responding HBCUs reported using this methodology to determine their annual spending, while 76.3 percent of total NCSE respondents did so, with the average percentage being 4.7 percent and 4.6 percent, respectively.
Gifts
FY24 marked a noteworthy increase in average new gifts to endowment reported by Study participants. The total gifts reported by HBCUs in this year’s Study were $91.9 million, up from $74.7 million reported last year. This increase is consistent with the total institutions group. Gifts to the 658 NCSE respondents in FY24 were $15.0 billion, up from $12.0 billion reported for FY23. HBCUs reported receiving average gifts of $9.2 million, a marked increase from the average gift of $7.5 million they received in FY23. The total respondents group reported an average gift of $24.4 million vs. $20.1 million last year. As it typically is, the median gift size was below that of the average ($4.2 million for HBCUs vs. $5.0 million for total NCSE respondents)—a sign that a few outlying institutions received exceptionally large gifts over the course of the fiscal year.
Operating Budget Support
A majority of respondents to the FY24 NCSE reported an increase in funding of the operating budget from the endowment – 41.9 percent, while 38.4 percent reported they decreased their support to the operating budget. Overall, HBCUs reported that an average of 7.4 percent of their operating budget was funded from their endowment vs. total NCSE respondents who reported an average of 14.0 percent. Median values were 3.8 percent vs. 6.1 percent for the HBCU cohort vs. the total respondents.
Responsible Investing Practices
While the adoption of various responsible investing practices has grown in recent years, 37.5 percent of total NCSE respondents reported instituting responsible investing practices at their institution. One third of HBCUs participating in this year’s Study reported adopting a responsible investment strategy at their institutions—11.1 percent indicated they use environmental, social and governance (ESG) strategies, 22.2 percent reported employing impact investing strategies and 10.9 percent reported they invest with diverse managers. (Note that multiple responses were allowed.) No HBCUs reported using negative screening in their investments.
We encourage you to use these top line insights as a guidepost for your own analysis into these important topics, but we encourage you to request and read the full Study in order to best evaluate your performance vs. your benchmark or peers. We are actively working to increase participation for this segment in the next Study, fielding in fall 2025. Commonfund Institute plans to continue its thought leadership work into the HBCU segment via the FY25 NCSE and through other research initiatives. If you are interested in participating, please contact us HERE.
