Independent schools reported an average decline of 11.3 percent on their endowment assets in fiscal year 2022, a sharp drop compared with the 25.8 percent returns bolstered by a surging stock market in FY2021, an annual report from the Commonfund Institute finds.

Based on information from 216 independent schools (private, nonprofit K-12 institutions), representing approximately $11.4 billion in combined endowment assets, the report, Commonfund Benchmarks Study of Independent Schools, prepared in collaboration with the National Business Officers Association (NBOA), found the annual return on FY2022 endowment assets to be the largest decline since FY2009, which saw a year-over-year drop of 18 percent following the global financial crisis of 2008 and 2009. When segmented by size, the FY2022 data indicates that the larger the endowment, the smaller the investment loss, as schools with assets exceeding $50 million reported an average decline of 10.6 percent, while those with assets under $10 million reported an average decline of 12.6 percent.

According to the report, long-term returns remained mostly unchanged, showing an annual increase over 10 years of between 7.8 and 8.3 percent compared to 8.2 percent in FY2021. Institutions reported that an average 6.1 percent of their operating budget in FY2022 was funded by endowments—virtually unchanged from the previous year—and that U.S. equities accounted for 32 percent of asset allocation, a year-over-year decrease of 2 percentage points. In addition, the allocation to non-U.S. equities jumped to 18 percent from 2 percent in FY2021.

“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,” said Commonfund Institute executive director George Suttles and NBOA president Jeffrey Shields in a joint statement. “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.”

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