The Performance of Endowments at Independent Schools Bounces Back

Day and boarding schools posted an average return of 9.2 percent in 2023.


Illustration by II

Endowment performance for independent schools — private, nonprofit day and boarding schools with students from pre-kindergarten through 12th grade — bounced back last fiscal year.

The average independent school endowment posted a return of 9.2 percent in 2023 — a welcomed 20.5-percentage-point turnaround after an average loss of 11.3 percent in 2022, according to Commonfund’s annual benchmark study of 210 schools. All the returns are net of fees and the 2023 fiscal year ran from July 1, 2022, to June 30, 2023, a typical budget-year period for most independent schools.

Portfolios didn’t change much over the course of 2023. The average allocation to U.S. stocks inched up from 32 to 33 percent and the allocation to fixed income rose 2 percentage points to 16 percent. The endowments had a slightly smaller part of portfolios dedicated to alternative investments — 29 percent, down from 31 percent the year before.

The larger the endowment, the more they are invested in alternatives. The 210 independent schools Commonfund surveyed had total assets of roughly $12.7 billion and were divided into three cohorts: over $50 million, between $10 and $50 million, or under $10 million. institutions with assets over $50 million had a 35 percent allocation to alts on average, compared with 11 percent and 6 percent for those with assets between $10 and $50 million and less than $10 million, respectively.

Last year’s returns also helped lift long-term performance for smaller institutional investors, which is most important to their sustainability, Commonfund noted. The 2023 gains boosted three-year average returns from 5.5 percent to 7.1 percent; five-year average returns stayed at 6 percent.

“These gains secured higher three-year returns of 7.1 percent on average across responding schools as longer-term returns held steady. This demonstrates that despite fluctuations year to year, independent schools can be confident that their strategies are in line with the purpose of perpetuity,” George Suttles, executive director of Commonfund Institute, and Jeffrey Shields, president and CEO of the National Business Officers Association, said in a statement about the report.

Ten-year average returns fell to 6.7 from the 8.1 percent posted by last year’s cohort (the same schools don’t always participate in the study every year). Commonfund said the drop in 10-year average performance could be attributed to a combination of two things: a year of positive performance that is no longer included in the calculation and the inclusion of 2022’s low performance.

In recent years, independent school endowments suffered slightly worse losses and better gains than other similarly sized institutions. Endowments overall, which includes colleges and universities, returned 7.7 percent on average in 2023 compared to fiscal year 2022’s dismal average loss of 8 percent. Smaller ones performed better on average.

Approximately 10 percent of U.S. students attend an independent school and there are many institutions in addition to the ones surveyed. The National Business Officers Association has 1,600 members from the U.S., Canada, Mexico, and 23 other countries.