The five largest university endowments in 2018 were all larger than $25 billion and belonged to Harvard, University of Texas, Yale, Stanford, and Princeton.

College endowment returns saw a decline in 2018 from the previous year, dropping to an average return of 8.2% from 12.2% in 2017, according to study results from the National Association of College and University Business Officers (Nacubo) and asset management firm TIAA. The smaller return was mostly a reflection of weaker U.S. and international equity markets. Returns were the lowest since 2016 when they dropped to -1.9%. The study looked at results from 802 U.S. college and university endowments and connected foundations in the United States, with total assets of $616.5 billion, plus 14 Canadian schools.

Endowments are permanent investments generating earnings that can be put toward spending priorities such as research, salaries or student financial aid. Most colleges and universities target long-term return rates of between 7% and 8%. These five universities enjoyed investment returns in the hundreds of millions of dollars, including Harvard’s $1.8 billion endowment distribution in 2018

Key Takeaways

  • Endowments are money and other financial assets donated to schools that are meant to be invested to grow the principal and provide additional future income for investing operational costs and financial aid.
  • The top 5 largest University endowments for 2018 were all in excess of $25 billion, led by Harvard University, then the University of Texas, then Yale, Stanford, and Princeton.
  • Average endowment returns rose 8.2% in 2018, down from an average return rate of 12.2% in 2017, but still better than 2016 levels, when returns dropped 1.9% from the previous year.

Harvard University - $38.3 Billion

Harvard University owns the largest academic endowment in the world. By comparison, Harvard’s endowment fund is almost $2 billion larger than the total market capitalization of HP Inc. (NYSE: HPQ), which holds the top position in the PC-manufacturing sector. Harvard maintains its endowment through the use of over 13,000 separate funds, and endowment distributions for operations represented 36% of the University’s income in 2018. Harvard schools are specifically referred to for roughly 80% of endowment donations, with the Radcliffe School relying the heaviest on revenue from endowments in 2018. The two main classifications of endowment funds support facility and students through professorships, financial aid for undergraduates and fellowships for graduate students. Since 1974, Harvard’s endowment has been managed by Harvard Management Company.

University of Texas - $30.9 Billion

The University of Texas Board manages four major endowment funds for the University of Texas System. This system encompasses eight main academic institutions and six health institutions. The four main endowment funds are the Permanent University Fund, the Permanent Health Fund, Long Term Fund, and Separately Invested Fund. The Permanent University Fund supports 19 smaller institutions within the University of Texas and the Texas A&M systems and contributes financial support to approximately 180,000 students. The Permanent Health Fund contributes revenue to medical research, health education, public health, nursing and treatment programs.

Yale University - $29.4 Billion

Yale’s endowment earned a 12.3% investment return (net of all fees) for the year ending June 30, 2018. Spending from the endowment is the largest source of revenue for the university and is used for faculty salaries, student scholarships, and other expenses. The amount to be spent in the fiscal year 2019 is expected to be $1.4 billion, which is close to 35% of the university’s net revenues. Endowment distributions have increased at 8.7% annually over the past 20 years. 

Yale’s spending and investment policies provide cash flow to the operating budget. Much of the income from the funds are earmarked for certain purposes. Approximately a quarter of spending from the endowment is specified by donors to support professorships and teaching. Nearly a fifth is dedicated to scholarships, fellowships, and prizes. A quarter is available for general university purposes. The remaining endowment funds are donor-designated to support specific departments or programs.

Yale's School of Law earns more than 50% of its revenue support through the endowment. Yale’s art gallery does not impose any fees for spectators. Instead, it relies heavily on endowments and generally receives 62% of its revenue from the donation pool. Finally, 75% of Yale’s library operations are paid for by endowment distributions.

$10 billion

13 schools had endowments of $10 billion or more in 2018, up from 10 in 2017, according to the Nacubo-TIAA study.

Stanford University - $26.5 Billion

Stanford University maintains over 7,000 separate endowed university funds. More than half of these are designated for a specified purpose. Annual payouts of approximately 5% of the value of the Endowment, or $1.2 billion in 2018, represent more than one-fifth of the University’s total operating revenue. Endowment payouts fund teaching, learning, and research for the arts, humanities, social sciences, sciences, engineering, law, medicine, business, and education.

The Stanford Management Company, established in 1991, oversees the operations and maintenance of the endowment funds. Stanford’s endowment fund covers a portion of the university’s operating expenses while a portion of earnings is retained and reinvested in the endowment.

Princeton University - $25.9 Billion

Almost 80% of Princeton's scholarship funding comes from endowments. Early in 2018, Princeton trustees approved a 7.7% increase in undergraduate financial aid to $174.2 million in the University’s operating budget for the current year. Endowment funds cover well over 80% of the undergraduate aid budget. The endowment also supports graduate students and their research. All Ph.D. students are fully funded, and master's programs are either partially or fully funded. Almost 30% percent of the latest cohort of domestic graduate students are first-generation college students or from low-income backgrounds. In addition, other areas of the university that receive endowment support include fellowships, professorships, research, and teaching programs. The average annual return on the University’s endowment for the past 10 years is 8%.