Just How Bad Was 2022 for Endowments?

In the worst year for performance since the financial crisis, small funds took the hardest hit.

Illustration by II

Illustration by II

The numbers are in: 2022 was the worst year for university investment offices since the financial crisis.

College and university endowments lost an average of 8 percent in the fiscal year ending June 30, 2022, the worst investment performance since 2009, according to the latest NACUBO-TIAA Study of Endowments. Performance was significantly down from the average gain of 30.6 percent in the prior year, when fiscal stimulus pushed both public and private markets to new highs.

The study is based on an analysis of 678 colleges and universities, including both public and private institutions for higher education. About 20 percent of the participants had over $1 billion in assets, 11 percent had $501 million to $1 billion in assets, and the rest had less than $500 million in assets. The smallest cohort — those with under $25 million in assets — made up 4 percent of the participant group.

Market value, which is based on a combination of external contributions and investment returns, dropped to a total of $807 billion across the 678 endowments, down 3.8 percent from the year before.

The return profile looks even worse when inflation is taken into account. According to Jill Popovich, senior managing director and regional general manager at TIAA, the standard annual target return for endowments has been 7.5 percent. The target is set based on three primary factors, including spending requirements, inflation expectations, and fees and other expenses. In the 2022 fiscal year, the return target jumped to 8.2 percent due to higher expectation of long-term inflation.


“It seems clear that many endowments undoubtedly will be considering how, or perhaps how not, to shift portfolio asset allocations to meet the challenges of a higher inflation world,” Popovich said in a press conference on Thursday.

NACUBO and TIAA also reported a wide performance gap between the larger and smaller funds. Endowments with more than $1 billion in assets lost an average of 4.5 percent in the last fiscal year, while those with less than $25 million in assets lost an average of 11.5 percent, according to the study.

The disparity is due mostly to the fact that smaller funds were more exposed to public equities and fixed income assets, which were crushed by macroeconomic headwinds and rising geopolitical tensions in the first half of 2022. The larger funds had more access to private market investments, whose performance figures typically lag those of their public counterparts by three to six months. According to the study, endowments with over $1 billion in assets had an average allocation of 63 percent to alternative strategies, including private equity, venture capital, real assets, and hedge funds. In comparison, those with less than $25 million in assets had over 70 percent allocated to U.S. equities and fixed income products and only 8 percent to alternative strategies. But once allocators receive the audited December marks for their private investments, the performance gap could narrow.

“As in prior years, larger endowments show far less reliance on fixed income and domestic public equities,” said Ivy Wong Flores, managing director at Nuveen, an investment management affiliate of TIAA. “The shift from public equities toward private equity and venture capital reflects the willingness and the ability of larger institutions to reach for higher return targets. Smaller endowments may not be able to pursue a similar approach due to greater fee sensitivity, lower risk tolerance, and different liquidity requirements.”