Dive Brief:

• Returns from college endowments were down 13.4% on average in the first quarter of the 2020 calendar year, with smaller endowments taking a bigger hit than larger ones.
• That's according to a recent survey by the National Association of College and University Business Officers (NACUBO) of 333 institutions that seeks to understand how the coronavirus pandemic is impacting institutional investments.
• Just 8% of respondents plan to increase the rate at which they spend from their endowments during the 2021 fiscal year as a result of the crisis.

Dive Insight:

Larger endowments tended to have a smaller share of their investments in U.S. equities than did smaller portfolios among the colleges surveyed. While smaller endowments were more adversely affected by the plummeting stock market than bigger ones, their institutions likely rely less on those returns for operating revenue, NACUBO noted. 

Just over a third of survey respondents reported endowment values of $100 million or less.

The decrease in the first quarter of 2020 is still far from what institutions experienced during the Great Recession. The value of endowments tumbled an average of 22.5% from July to November of 2008, according to a separate NACUBO study.

Nearly three-fourths of respondents in the most recent survey expect to spend from their endowments at the same rate in the 2021 fiscal year. A recent report from the industry group registered the rate at an average of 4.5% across the sector. Meanwhile, 8% of respondents plan to spend more, while 12% are uncertain.

The idea of colleges spending more from their endowments as a way to weather a financial crisis has gained attention in recent months. President Donald Trump pointed to Harvard University's endowment — at nearly $40 billion in the 2019 fiscal year — as a reason it should not accept its share of the money Congress allocated colleges in response to the coronavirus.

But college officials are generally opposed to the concept, citing restrictions from donors on how the money can be used and a general wariness of spending down a fund that is meant to help future generations. Already, nearly half of money spent from endowments goes toward financial aid.

Harvard plans to spend less from its endowment in the coming fiscal year, though a new assessment on distributions will make money available to help the institution adapt to the pandemic.

How the pandemic will affect philanthropy is another question. Giving to higher ed will most certainly ebb as a result of the crisis, Inside Philanthropy reports. And state funding is already sliding. Whereas colleges might have used tuition increases to offset those declines in previous downturns, they now face growing pressure to keep their costs down.

Average tuition discount rates at private colleges are nearing 50% for all undergraduates, and analysts have said the practice is "unsustainable." Meanwhile, schools are walking back plans to raise tuition and are getting more calls from students appealing their financial aid awards.

Two in five college fundraisers surveyed earlier this year said they weren't sure they would meet their goals for the 2020 fiscal year. The rate was higher for those at liberal arts colleges. 

In a more recent survey, around 40% of fundraisers said they expect philanthropic revenue to be down by 10% or more this year. Half that share are readying for that income to fall by more than 20%. Of particular concern is a drop-off in big gifts, which could have an outsized impact on the institution.