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Survey: College endowments top 10 percent returns

BOSTON --Colleges and universities earned average investment returns of 10.7 percent on their endowments during fiscal 2006, narrowly beating the Standard & Poor's 500 Index, according to national survey results released Wednesday.

As usual, the largest endowments performed the best. Schools with endowments of $1 billion or more earned 15.2 percent during the year ending June 30, according to preliminary figures on 765 institutions collected by the National Association of College and University Business Officers and TIAA-CREF, a financial services organization.

Colleges with less than $25 million earned just 7.8 percent.

The biggest endowments typically have access to lower average fees, and to more sophisticated money managers and investments. Endowments of $1 billion or more, for instance, had less than half their money in stocks last year. Nearly one-quarter of their assets were in hedge funds, 5.9 percent in private equity and 3.5 percent in venture capital.

By contrast, colleges with endowments of under $25 million had 58.9 percent in stocks, 2.6 percent in hedge funds and less than 1 percent combined in private equity and venture capital.

The survey's annual ranking of universities by endowment size will not be released until January, but several of the richest schools have already released results for fiscal 2006.

Harvard University, the world's wealthiest in terms of total assets, earned 16.7 percent last year and increased its endowment to $29.2 billion. Massachusetts Institute of Technology, which had the sixth largest university endowment last year, recently reported its endowment earned 23 percent and stands at $8.4 billion.

Universities typically spend about 5 percent of their endowments per year on operating costs and financial aid. So, not accounting for new fundraising, they have to earn about 9 percent to retain their real value -- recouping the payout, beating inflation and covering investment management fees.

Colleges and universities had earned 9.3 percent on average in fiscal 2005. Over the last 10 years, average returns are 8.8 percent.

The most recent figures from the Council for Aid to Education show U.S. colleges and universities raised $25.6 billion in 2005.

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