Independent schools reported a 25.8 percent average return on their endowment assets in fiscal year 2021, a sharp increase compared with the 2.8 percent returns in FY20, an annual report from the Commonfund Institute finds.

Based on information from 215 independent schools (private, nonprofit K-12 institutions), representing approximately $13.8 billion in combined endowment assets, the report, Commonfund Benchmarks Study of Independent Schools, found the average return on FY21 endowment assets to be the highest average annual return since the study commenced in FY05. When segmented by size, the FY21 data indicates that the larger the endowment, the greater the return, as schools with assets exceeding $50 million reported an average return of 29.3 percent (vs. 2.7 percent in FY20), while those with assets under $10 million reported a 21.2 percent return (vs. 3.3 percent in FY20).

According to the report, average 10-year returns for participating schools rose to 8.2 percent from FY20’s 7.0 percent, and three- and five-year returns also significantly improved, nearly doubling compared with last year’s data. Institutions reported that in FY21 an average 6.8 percent of their operating budget was funded by endowments, compared with 5.9 percent in the previous fiscal year; and that U.S. equities accounted for a 34 percent asset allocation, a year-over-year increase of 3 percent. Fixed income, international equities, alternative strategies, and short-term securities/cash/other each shifted by a few percentage points.

“It would be hard to overemphasize the significance of fiscal 2021’s strong return when it comes to the long-term health and vitality of our nation’s independent schools,” said Commonfund Institute executive director George Suttles. “Endowments are a major source of funds to support operating budgets, which are under pressure in an environment shaped by the global pandemic and inflationary forces. Even beyond that, however, a sound endowment gives schools the confidence that their vision and mission will endure in the future.”

(Photo credit: Getty Images/Daniel de la Hoz)