The endowments of four hundred and sixty-three U.S. colleges and universities returned an average of -0.3 percent in the fiscal year that ended June 30, 2012, down sharply from the previous year's return of 19.2 percent, a new report from the Commonfund Institute finds.

Preliminary data for the 2011 NACUBO-Commonfund Study of Endowments, which was conducted in partnership with the National Association of College and University Business Officers, found that the highest-performing endowment in FY2012 returned 15.8 percent while the lowest returned -9.5 percent. Large endowments with assets in excess of $1 billion produced the best returns, averaging 1.2 percent, while those with assets between $501 million and $1 billion returned an average of 0.1 percent. Midsize endowments with assets between $25 million and $500 million averaged negative returns, while small endowments with assets of less than $25 million reported an average return of 0.2 percent.

Asset allocations varied widely among the institutions surveyed. For example, those with endowment assets of more than $1 billion allocated 10 percent on average to domestic equities, while those with endowments of less than $25 million allocated 37 percent to domestic equities; the two cohorts with the largest endowments allocated 11 and 9 percent to fixed income, while the three cohorts with smaller endowments allocated 23 percent or more; and those with endowments of more than $1 billion allocated 3 percent to short-term securities, cash, or other assets, while those with less than $25 million allocated 9 percent.

One significant trend in higher education asset allocation over the past decade, especially among larger institutions, has been the growth in allocations to alternative strategies such as hedge funds, private equity, international private equity, global venture capital, natural resources, and distressed debt. According to the preliminary report, alternative strategies accounted for 59 percent of endowment assets among institutions with endowments of more than $1 billion, 49 percent among those with endowments between $501 million and $1 billion, and 14 percent among those with endowments of less than $25 million. Data from more than eight hundred institutions of higher education will be included in the final NCSE analysis, to be released in January.

"The data for FY2012 as well as for all longer periods confirm the historic pattern of outperformance by larger institutions, chiefly those with assets in excess of $1 billion," said NACUBO president and CEO John D. Walda and Commonfund Institute executive director John S. Griswold in a joint statement. "This pattern was interrupted in the financial crisis of 2007-2009, when smaller institutions tended to outperform owing to their larger allocations to fixed income and short-term securities. This was short-lived, however, as larger institutions have produced the best returns over the FY2010-FY2012 period."