A Closer Look at Historically Black Colleges and Universities

May 15, 2024 |
3 minute read
|
A Closer Look at Historically Black Colleges and Universities
6:19

Earlier this year, in partnership with the National Association of College and University Business Officers (NACUBO), Commonfund released the 2023 NACUBO-Commonfund Study of Endowments (NCSE), marking the 50th anniversary of the Endowment Study. The Study examines investment performance, governance and management practices at hundreds of U.S. higher education endowments and related foundations over the July 1, 2022 – June 30, 2023, fiscal year (FY2023). 

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 688 total respondents from the full NCSE report is one of the custom cohorts we looked at this year. 

HBCUs accounted for $2.2 billion of the reported $839.1 billion in assets represented in the full FY2023 Study, with an average endowment size of $219.5 million vs. $1.2 billion respectively.   

THE TOP-LINE RESULTS

Performance

Returns were positive across both the HBCUs and the total NCSE respondents in FY2023 and across all time horizons—a sharp reversal from FY2022’s down year. The 10 HBCUs participating in this year’s Study reported a 1-year average return of 5.7 percent vs. 7.7 percent for total NCSE respondents. Three-, five- and 10-year average returns for HBCUs were reported as 8.3, 6.5 and 6.6 percent respectively vs. 9.3, 7.0 and 7.2 percent for total NCSE respondents over the same time periods. 

Asset Allocation

HBCUs participating in the FY2023 NCSE reported significant over-weight to U.S. Equities and Fixed Income that were nearly double those of total NCSE respondents (22.2 percent vs. 12.5 percent and 21.1 percent vs. 11.0 percent respectively). HBCUs also reported an overweight of 21.1 percent vs. 17.1 percent to Private Equity investments. Over-weights were also reported in Secondaries and Sustainable investments, although they were significantly smaller: 0.4 vs. 0.1 percent to both Secondaries and Sustainable Investments. Notable underweights, compared to total NCSE respondents, were reported by HBCUs in marketable alternatives (9.2 percent vs. 15.9 percent), private venture capital (4.7 percent vs. 11.9 percent), global equities (4.2 percent vs. 7.5 percent) and real assets (7.7 percent vs. 11.2 percent). 

Spending

Institutions participating in this year’s NCSE reported withdrawing more from their endowments than in FY2022 and the average effective spending rate reported by institutions also increased. HBCUs reported an annual effective spending rate of 3.0 percent vs. 4.7 percent for total NCSE respondents. Looking at spending policy, the most frequently reported spending methodology being used is a percentage of a moving average, 90.0 percent of HBCUs reported using this method to determine their annual spending, while 77.1 percent of total NCSE respondents did so, with the average percentage being 4.5 percent and 4.8 respectively.  The other 10.0% of HBCUs reported that they decide on an appropriate spending rate or dollar amount each year – with an average pre-specified percentage spent of 4.5 percent, while only 2.5 percent of total NCSE respondents reported using this methodology, with an average pre-specified percentage spent of 4.8 percent. 

Gifts

After a noteworthy increase in average new gifts to endowment reported by Study participants in FY2022, this year’s total NCSE respondents reported a reversal. The total gifts reported by HBCUs in this year’s Study were $74.7 million, while total gifts to the 688 NCSE respondents was $13.3 billion. HBCUs reported receiving average gifts of $7.5 million vs. an average of $20.3 million for total NCSE respondents. As it typically is, the median gift size was below that of the average ($3.2mm for HBCUs vs. $4.7mm 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

The FY2023 NCSE saw nearly half of total responding institutions (48.2 percent) report an increase in funding from the endowment, while 25.7 percent reported a decrease. Overall, HBCUs reported that an average of 2.7 percent of their operating budget was funded from their endowment vs. total NCSE respondents who reported an average of 10.9 percent and a median of 0.3 percent vs. 5.0 percent respectively.

Responsible Investing Practices

While the adoption of various responsible investing practices has grown in recent years, 34.6 percent of total NCSE respondents reported instituting any responsible investing practices at their institution. Over forty-four percent of HBCUs participating in this year’s Study reported adopting a responsible investment strategy at their institutions—split evenly between ESG and impact investing. No HBCUs reported using negative screening in their investments.

These top line insights should serve 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 October 2024. Commonfund Institute plans to continue its thought leadership work into the HBCU segment via the FY2024 NCSE and through other research initiatives. 

Fill in your details to download the custom report on HBCUs.

Request your copy of the latest NACUBO-Commonfund Study of Endowmentes

Commonfund partners with the National Association of College and University Business Officers (NACUBO) to create the NACUBO-Commonfund Study of Endowments (NCSE). This five-year partnership includes the annual development and publication of the NACUBO-Commonfund Study of Endowments (NCSE), the preeminent analysis of U.S. college and university endowment performance. The study examines investment performance and management practices at hundreds of U.S. higher education endowments and foundations. 
Allison Kaspriske

Author

Allison Kaspriske

Director

Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.

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Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.