Following the release of the FY25 study, Commonfund did a deep dive into results from the 144 participating institutionally-related foundations (IRFs). Below is a comparative analysis of these institutions and the 657 total respondents from the full NCSE report, and a disaggregation of IRFs’ response data by endowment size cohort. Note: Additional types of schools surveyed in the full report are private colleges and universities, public colleges and universities, and combined endowment/foundations. Detailed analysis of these is included in the full report.
IRFs accounted for $63.6 billion of the reported $944.3 billion in assets represented in the full FY25 Study, with an average endowment size of $441.7 million vs. $1.4 billion respectively.
Performance
Returns for all time horizons reported in the Study were positive across both groups for all institution sizes. The 144 IRFs participating in this year’s Study reported an 11.1 percent average 1-year return vs. 10.9 for the total NCSE respondent’s cohort. Returns by size for IRFs ranged from 10.2 percent for those with $501 million - $1 billion to 11.8 percent for those with $51 - $100 million in endowed assets, reflecting no clear correlation between size and performance in FY25 among IRFs.
Three-, five- and 10-year average returns for IRFs were also mixed. The $51 - $100 million cohort posted the strongest 3-year return of 11.4 percent, while the $1 - $5 billion cohort reported the highest 5-year and 10-year returns at 10.7 percent and 8.0 percent, respectively. The under $50 million group reported the lowest 5-year returns at 9.5 percent, while the $101 - $250 million cohort reported the lowest 10-year returns, 7.2 percent.
Asset Allocation
Participating IRFs reported an overweight to U.S. equities (18.7 percent vs. 13.7 percent) and fixed income (15.0 percent compared with 10.7 percent) when compared with the NCSE total respondents. Notable underweights included private venture capital (6.5 percent vs. 12.2 percent), private equity (13.1 percent vs. 16.8 percent), and marketable alternatives (9.8 percent vs. 15.4 percent).
When looking at IRFs by size, trends mirror those in the full Study – IRFs in the largest cohort reported a 34.0 percent allocation to alternatives strategies while those in the smallest reported 7.0 percent, on average. Meanwhile the largest cohort allocated 14.8 percent to U.S. equities compared with 63.1 percent for the smallest, on average. There was also a notable gap in fixed income allocations among the largest and smallest IRFs: 11.6 percent vs. 24.5 percent on average, respectively.
Spending
Responding IRFs reported an annual effective spending rate of 4.1 percent compared with 4.9 percent for total NCSE respondents. Larger IRFs had a higher effective spend rate – 4.4 percent for the largest IRF cohort compared with 4.0 percent for the smallest. Looking at spending policy, the most frequently reported spending methodology being used is a percentage of a moving average, 81.9 percent of responding IRFs reported using this method, while 74.3 percent of total NCSE respondents did so. Rates of institutions using this methodology were similar across IRF size cohorts, ranging from 76.7 percent of the smallest IRFs and 86.8 percent of those between $101 and $250 million.
Gifts
Average gifts to the 657 NCSE respondents in FY25 were $22.6 billion, compared with $17.5 million for IRFs overall. Average gifts for IRFs by size were correlated with size, as is the case across Study data. IRFs with assets from $1 - $5 billion reported $86.6 million in average gifts, significantly higher than mid-sized schools: for example, IRFs between $251 - $500 million reported $12 million in average gifts, while those with under $50 million reported $1 million, on average.
Operating Budget Support
A plurality of total respondents to the FY25 NCSE reported a year over year increase in the percentage of operating budget funded by the endowment – 42.8 percent – while 37.5 percent reported a decreased rate of support to the operating budget. The average percentage of total schools’ operating budgets funded by endowments in FY25 was 15.2 percent, meanwhile for IRFs that figure was 24.0 percent. However, there are typically outliers that fund a disproportionately high share of their operating budgets from their endowment, which is demonstrated by the disparity between average and median values: Median values were 4.2 percent for IRFs and 6.1 percent for total respondents. Results by IRF size ranged from 11.1 percent for those between $501 million - $1 billion, to 30.7 percent for those with $251 - $500 million.
For institutionally-related foundations, strong investment performance is ultimately the engine that drives their higher education mission forward. By maintaining disciplined asset allocation, prudent spending policies, and other strategic governance practices, these foundations ensure that their endowments are positioned to generate the long-term returns that colleges and universities depend on for generations to come.
We hope these top-line insights will serve as a guidepost for your own analysis into these important topics and we encourage you to read the Study in its entirety to best evaluate your performance vs. your benchmark or peers.