A Closer Look at Independent Schools with Smaller Endowments

Commonfund, in partnership with NBOA, recently released the 2025 Commonfund Study of Independent Schools (CSIS, or, the “Study”). The Study examines investment performance, governance and management practices at hundreds of independent school endowments over the July 1, 2024 – June 30, 2025 fiscal year (FY2025).

Following the release of the FY2025 study, Commonfund took a closer look at institutions with relatively small endowments – defined as those with fewer than $15 million in endowed assets – which comprised a quarter of total participants. In the full Study, the cohorts are divided between those with fewer than $10 million, those with $10-$50 million, and those with over $50 million in endowed assets.

Below, we break these cohorts down further, allowing for more targeted analysis of top-line results and demonstrating the importance of participation across the endowment size spectrum. Note: Additional analysis across size cohorts and types of schools is included in the full report. Request your copy here.

THE TOP-LINE RESULTS

Asset Size

In total, 58 institutions with less than $15 million in endowed assets participated in the Study, representing 24 percent of the 243 total respondents.

For this analysis, cohorts with endowment assets under $15 million are segmented into increments of $5 million:

• Those with fewer than $5 million in endowed assets;
• Those with endowed assets between $5 million and $10 million;
• and those with between $10 million and $15 million.

Returns

For FY2025, trends in 1-year net annualized returns for schools with less than $15 million in endowment assets aligned with trends seen in the broader Study: larger institutions outperformed smaller ones, on average. Those with assets under $5 million reported a 10.3 percent average return, and those with assets between $5 million and $10 million reported 11.3 percent. Schools with assets between $10 million and $15 million reported 12.3 percent 1-year returns, which surpassed the 11.5 percent reported in the Study for total schools, on average.

While smaller institutions – particularly those with under $10 million – outperformed total schools in 3-year returns, other return periods are mixed. For the 10-year period, schools with assets between $5 million and $10 million outperformed other cohorts, including total schools (8.4 percent), while those with assets between $10 million and $15 million outperformed others over the 5-year period (10.8 percent), on average. Note: data was insufficient to report 5- and 10-year returns for the smallest cohort.

Asset Allocation

Asset allocation among these size cohorts for FY2025 mirrored trends in the broader report. The most apparent finding was the correlation between institution size and the allocation to alternatives¹. For example, those with assets between $5 and $10 million allocated 2 percent of their dollar-weighted portfolios to alternatives strategies compared with 30 percent of total schools. This reflects the reality that larger institutions have a greater ability to take on illiquidity and more resources available to manage an often complex alternatives portfolio. Meanwhile, there was a negative correlation between institution size and allocations to fixed income, as shown in the graph below: the smallest schools reported the highest allocations to this asset class. Finally, an overweight to U.S. equities – which have outperformed private equities in the past few years – has contributed to smaller institutions’ outperformance in the 3-year period.

Fund Flows

Small institutions aim to spend roughly the same percentage of their endowment compared with total schools: Those with under $5 million and between $10 and $15 million reported and average 4.3 percent stated spend policy rate – equivalent to the average rate of total schools – while those with assets between $5 million and $10 million reported 4.2 percent, on average.

Schools with smaller endowments were less able to leverage their endowment to fund their operating expenses in FY2025. Those with assets under $5 million reported that just 1.6 percent of their operating budget was funded by their endowment, compared with 7.1 percent for total schools. Schools in these smaller cohorts typically rely more on annual giving than their endowments to fund operations (but still rely less on annual giving than total schools).

Given that operating expenses are not substantially funded by annual giving or their endowments, it is unsurprising that enrollment was the top concern reported among each small school cohort, according to Study data.

For smaller institutions that may face unique constraints and opportunities for growth, the Study further explores the purpose of an endowment, outsourcing trends, and broader governance considerations. We hope these insights will serve as a guidepost for your own analysis into these important topics. We encourage you to read the Study in its entirety to best evaluate your performance vs. your benchmark or peers.

1. Alternatives strategies include private equity, private credit, marketable alternatives, venture capital, secondaries, sustainable investments, private real estate, real assets, commodities, and distressed debt.