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Returns for Independent Schools Decline in FY2022

March 15, 2023 |
7 minute read

Independent Schools Report -11.3% Return on Endowment Assets for FY2022, Marking Sharp Reversal from Last Year’s 25.8% Gain

Prior Years’ Returns Mitigate Long-Term Impact; New Gifts to Endowments Increase

WILTON, Conn., March 15, 2023 — Institutions participating in the Commonfund Benchmarks Study® of Independent Schools for the 2022 fiscal year reported an average annual return of -11.3 percent on their endowment assets. Compared to the 25.8 percent gain reported for fiscal 2021, the year-over-year reversal was the largest since the study commenced for the 2005 fiscal year. (All returns are reported net of fees. Fiscal year 2022 covers the period from July 1, 2021, to June 30, 2022, and coincides with the budget year of most independent schools.)

The FY2022 return also represented the second greatest decrease in endowment assets in the history of the study; the largest, -18.0 percent, was reported for FY2009 in the wake of financial crisis and great recession. The return for FY2021 was the highest in the study’s history, meaning the year-over-year change totaled 37.1 percentage points. 

While the negative FY2022 return hurt longer-term performance, which is of primary importance to the financial health and sustainability of perpetual institutions, good returns from prior years helped to mitigate the impact. Average 10-year returns for participating schools declined to 8.1 percent from last year’s 8.2 percent and remained above FY2020’s 7.0 percent 10-year average. Three- and five-year returns fared less well, however. Three-year returns averaged 5.5 percent, less than half of last year’s 11.1 percent, but down only marginally from FY2020’s 5.7 percent. Five-year returns sagged to an average of 6.2 percent from last year’s 10.4 percent, but once again remained above the five-year average of 5.4 percent reported for FY2020.  

George Suttles, Executive Director of Commonfund Institute, and Jeffrey Shields, President and CEO of the National Business Officers Association, noted in a joint statement that poor investment returns and rising inflation struck independent schools simultaneously. “The steep rise in inflation not only raises schools’ operating costs, it is also the main cause of the decline in financial markets, which erodes the long-term assets on which endowed schools depend to support their annual budgets. Schools that had strong investment returns over the previous decade and that managed expenses prudently should have a buffer, but a prolonged market downturn or an economic recession would greatly heighten the pressure on the PK – 12 independent school community.”

Two hundred sixteen independent schools representing some $11.4 billion in combined endowment assets provided data for the Study. Institutions participating in the Study comprise day schools, boarding schools and schools that are a combination of both. Independent schools are private, nonprofit institutions enrolling students from pre-kindergarten through 12th grade. In the U.S., approximately 10 percent of the student population attend an independent school, according to the National Association of Independent Schools (NAIS).  

Commonfund conducts the annual study of independent school endowment management practices and policies in conjunction with the National Business Officers Association (NBOA), a nonprofit organization focused exclusively on independent school financial and operational matters.

Data gathered in the Study are aggregated for all 216 participants and, for closer analysis, are segmented into three size cohorts: institutions with endowment assets over $50 million; those with assets between $10 and $50 million; and those with assets under $10 million.

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Investment Returns

As noted, in FY2022 all participating institutions reported an average return of -11.3 percent. When segmented by size, data show that returns correlated with size, i.e., the larger the endowment the lesser the investment loss. Schools with assets over $50 million reported an average return of -10.6 percent (29.3 percent a year ago); those with assets between $10 and $50 million reported a return of -11.3 percent (25.3 percent); and those with assets under $10 million reported a -12.6 percent return (21.2 percent).  

The same size correlation did not hold across all time periods when looking at longer-term results. Independent schools with assets over $50 million reported an average 10-year return of 7.8 percent but that was equaled by schools with assets under $10 million and topped by the average 8.3 percent return reported by schools with assets between $10 and $50 million. For trailing three- and five-year periods, institutions with largest endowments reported the highest average returns—5.6 percent and 6.5 percent, respectively. Schools with assets between $10 and $50 million and those with assets under $10 million both reported an average return of 5.4 percent for the trailing three years. The five-year return of schools with assets between $10 and $50 million averaged 6.2 percent while for those with assets under $10 million it was 5.7 percent.

Looking at return attribution, in FY2021, U.S. equity returns were very strong (44.1 percent for the broad market Russell 3000 Index) and schools participating in the study benefited from allocations to the asset class that ranged from 30 percent to 47 percent. FY2022 returns were much different, however, as the Russell 3000 returned -13.9 percent. Fixed income, which accounted for 28 percent of the portfolios of schools with assets under $10 million, also lagged prior years’ returns at -10.3 percent for the Bloomberg Barclays U.S. Aggregate Bond Index. Larger schools, which have the biggest allocations to alternative strategies, were helped in FY2022 by these strategies’ better performance (the Burgiss Private IQ – PE and VC Index gained 7.5 percent and commodities led all asset classes with returns in excess of 50 percent).

Asset Allocation

Asset allocations reflected movement over the course of the fiscal year. The greatest change was a three-percentage-point decrease, to 18 percent, for international equities. In addition, there were three two-percentage point changes: a decrease to 32 percent in U.S. equities and increases in alternative strategies, to 31 percent, and short-term securities/cash/other, to 5 percent. There was also a one-percentage-point increase in the allocation to fixed income. The three-percentage-point increase in the allocation to domestic equities seen a year ago was nearly reversed by the two-percentage-point decline this year, possibly due to action in the marketplace as this asset class—as well as international equities—experienced headwinds in the second half of the fiscal year.

Participating institutions reported the following asset allocation for FY2022 (with a comparison to FY2021):

Asset Allocations* for Fiscal Years 2022 and 2021

  FY2022 FY2021
numbers in percent (%)
U.S. equities 32 34
Fixed income 14 13
Non-U.S. equities 18 2
Alternative strategies 31 29
Short-term securities/cash/other 5 3

Of the 31 percent allocated to alternative strategies, marketable alternative strategies accounted for the largest single sub-allocation, at 11 percent. This was down from 12 percent last year and, even more significantly, from 17 percent in FY2020, with the largest declines coming from schools with assets over $50 million and those with assets between $10 and $50 million. (Marketable alternative strategies include hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives.) The second largest allocation, at 9 percent, was to private equity; this represented a two-percentage-point increase compared with last year (and three percentage points compared with FY2020). (Private equity includes LBOs, mezzanine, M&A funds and international private equity). Venture capital accounted for a 3 percent allocation, unchanged year over year. Private credit, energy and natural resources, and private equity real estate (non-campus) each accounted for 2 percent allocations. Two other categories accounted for 1 percent each: commodities and managed futures and distressed debt.


Participating schools’ stated policy spending rate in FY2022 was 4.3 percent, unchanged year over year. By size, it segmented into a tight range of 4.3 percent for schools with assets between $10 and $50 million, 4.2 percent for schools with assets over $50 million and 4.1 percent for schools with assets under $10 million. Ninety-four percent of participating schools said they have a spending policy.

Spending in Response to the Pandemic

Seventy-one percent of study respondents said they kept their spending the same in response to COVID-19 in FY2022 compared to 64 percent in FY2021. Fifteen percent said they increased spending while 9 percent reduced spending.


Perhaps reflecting investors’ good investment returns in recent years, new gifts to the endowments of participating institutions soared 60 percent in FY2022, reaching an average of $2.4 million versus $1.5 million in FY2021 and double the $1.2 million reported for FY2020. Schools with endowments over $50 million reported the highest average new gifts to endowment, $4.4 million, up from $2.8 million a year ago. Institutions with assets between $10 and $50 million reported new gifts averaging $1.5 million, a 50 percent jump from FY2021. Schools with assets under $10 million reported new gifts averaging $0.6 million, an even sharper tripling of the FY2021 figure.

Operating Budget Support

Study data show that the largest endowments rely on their endowment to fund annual budgets to a greater extent than the other two size cohorts while all three size cohorts are much closer in terms of their reliance on annual giving.

Participating institutions reported that an average of 6.1 percent of their operating budget was funded by the endowment in FY2022 compared with 6.8 percent in FY2021 and 5.9 percent in FY2020. Responding institutions with assets over $50 million by far reported the highest share of their budget funded by endowment, 11.2 percent. That was significantly above 4.3 percent reported by institutions with assets between $10 and $50 million and 1.9 percent reported by schools with assets under $10 million.

In terms of annual giving in support of the operating budget, in FY2022 all participating institutions funded an average of 7.0 percent of their budget from this source, down from 7.2 percent in FY2021. The largest participating institutions funded 7.9 percent of their operating budget through annual giving compared with 6.4 percent and 6.9 percent for the other two cohorts (in descending order by size of endowment).

Responsible Investing

A suite of questions regarding responsible investing was introduced for the fiscal 2019 Study. Since that initial set of questions, responses have indicated an accelerating rate of adoption of responsible investing practices. For fiscal 2022, the rate at which these practices are being adopted or considered by boards leveled off compared to prior years.  

For example, 11 percent of respondents reported seeking to include investments ranking high on ESG (environmental/social/governance) criteria, up from 10 percent a year ago. But that 10 percent was more than twice the prior year’s 4 percent. Eight percent seek to screen out investments not consistent with the institution’s mission (socially responsible investing, or SRI), a level that was unchanged year over year. Three percent said they allocate a portion of their endowment to investments that further the institution’s mission (impact investing), down from 4 percent in FY2021. A similar decline was found in the share of respondents seeking to include investments with diverse managers (6 percent versus 7 percent).

A year ago, double-digit increases were reported in the share of schools whose boards/investment committees were actively discussing the adoption of ESG, SRI, impact investing or diverse managers. While that rate of growth was lower this year, the share of institutions actively discussing these practices increased for all four. There was a decline in the proportion of institutions that are considering adding three of the four responsible investing practices to their investment policy statement within the next 12 months (the exception being impact investing, which showed a modest increase). 

To request a copy of the full study, submit your information on this web page.

Media Contacts  

Archana Kannan
Prosek Partners

Cecily Garber
Associate Vice President, Communications and Member Relations
National Business Officers Association


Commonfund Institute


Commonfund Institute

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