Viewpoint | Why are Gifts to Endowments Declining?

March 17, 2021 |
2 minute read

For the third straight year, Commonfund Benchmarks Study® of Independent Schools (CSIS) participants reported average new gifts to endowment declined, this year falling to an average of $1.2 million from $1.5 million in FY2019. Moreover, new gifts declined for schools in each of the three size cohorts. Figure 1 below charts the trend over the past decade.

The last time new gifts to endowment showed an increase was FY2017, when they grew to an average of $2.1 million, a significant increase over the previous year’s average of $1.6 million. Every year since, they have declined by an average of $0.3 million; measured in dollars, the annual decline has been level, but with each passing year the percentage decline gets larger. From FY2017 to FY2018, the decline was 14 percent; from FY2019 to FY2020 the decline was 20 percent. Cumulative three-year decline: 43 percent.

What happened? Looking back, giving was fairly consistent in the first half of the past decade, but trending higher. Slow growth from a relatively low base may be traced to the lingering effects of the 2007-2009 market collapse and Great Recession. Later in the period, it is possible that year-end giving in calendar 2018 (second fiscal quarter of FY2019) was negatively impacted by a sharp sell-off in the equity market. But that was a one-time event, as equity markets recovered and have since reached new highs. It is more likely that we may be seeing the effect of the Tax Cuts and Jobs Act of 2017, which effectively doubled the standard deduction and, in so doing, eliminated the charitable deduction for millions of taxpayers who could no longer itemize their tax returns. This meant that that those who could still afford big gifts and get the deduction had more demands on their money since most of those giving smaller amounts couldn’t afford to be quite as charitable. This could also explain the bump in FY2017, as people accelerated giving to take the tax deduction before it expired.


Observations from experienced professionals at the National Business Officers Association (NBOA) provide insight into another trend to emerge over the past few years. Independent schools have seen donors who are financially able to give large sums of money become more sophisticated in their philanthropy. Some of these donors want to see tangible results of their investment in schools and expect a return on investment. A gift to endowment does not always meet this new criterion.

Another consideration is that, for some schools, the more immediate financial need is gifts to the annual fund rather than gifts to the endowment, which is a more long-term strategy. Since the 2008 financial crisis, the independent school business model has struggled, being very dependent on tuition dollars. The gap between what schools charge and what they collect in tuition has been growing with the rise in tuition discounting (financial aid). Some schools need donor dollars to fill those annual gaps rather than growing the endowment for the future.


CSIS Benchmark Study Request

Stay connected with the Insights Blog

Popular Blog Posts

Market Commentary | Insights Blog

Chart of the Month | The Surprising Relationship Between Money Supply and Inflation

The potential for rising inflation is becoming a top concern for many investors and consumers. Many believe that inflation is already here as evidenced by price increases in commodities, homes,...
Perspectives | Insights Blog

In Remembrance: Verne O. Sedlacek

A Gentle Giant The Commonfund community was shocked and saddened this week by the news of the sudden passing of our former President and CEO, Verne Sedlacek at the age of 67.
Investment Strategy | Insights Blog

What is an OCIO?

Outsourced investment management, once primarily a solution for small institutions with limited resources, is now used by a broad range of long-term investors. When properly implemented, outsourcing...


Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. 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. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. 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 Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or 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. Past performance is not indicative of future results. For more information please refer to Important Disclosures.