University endowments posted the lowest investment returns since the 2008 financial crisis, yet schools upped their spending in fiscal 2016, according to a survey released Tuesday by CommonFund and the National Association of College and University Business Officers.

Endowments have been on shaky ground coming out of the recession. Average annual returns have volleyed since plummeting 18.7 percent in 2009. In the 12 months ending June 30, endowments at 805 colleges and universities recorded a negative 1.9 percent return, compared to 2.4 percent growth the prior fiscal year, according to the survey.

Nevertheless, the effective spending rate for fiscal 2016 edged up to 4.3 percent, from 4.2 percent in fiscal 2015. Nearly three quarters of universities reported raising their endowment spending, with a median increase of 8.1 percent. Colleges maintain endowments, a collection of tax-exempt donations and investments, to pay for salaries, research, financial aid and other expenses. Those included in the survey held a total of $515 billion in assets, with an average of about $640 million.

“Endowments continue to be essential to the quality of our institutions, to affordability for students who attend our institutions,” John Walda, president and chief executive of the National Association of College and University Business Officers, said on a call with reporters Monday. “Institutions obviously felt, even in an environment where the investment returns were negative, that they have a need to rely on endowment funds to continue to improve.”

Still, years of tepid returns threaten to curtail future spending. Ten-year average returns fell to 5 percent last year, down from 6.3 percent in fiscal 2015 and 7.1 percent in fiscal 2014. Universities aim for about an 8 percent return each year to maintain purchasing power, so missing that mark jeopardizes their ability to increase endowment spending down the road.

“This is the strategic challenge that is not only going to face investment managers and the financial side of institutions, but also frankly the operational side if in fact the returns are going to be this challenged going forward,” William F. Jarvis, executive director of CommonFund Institute, said on the call.

Returns for all the investment categories in the survey were lower than in the prior fiscal year, with private equity real estate investments producing the highest return of 7.1 percent, compared with 9.9 percent a year earlier, the report said.

Jarvis noted that institutions with large endowments, over $500 million, suffered deeper losses than schools with under $25 million in assets, which had a heavy allocation to fixed income and bonds, relatively safer investments. Well-heeled universities, with diverse portfolios and high-powered fund managers, tend to log the highest returns, but some marquee names are experiencing a reversal of fortune.

Harvard University, for instance, reported a 2 percent decline in the value of its $35.7 billion endowment last year. The rocky performance of the endowment led to a shake-up at Harvard Management Company, which announced last week a change in investment strategy, workforce reductions and a new compensation structure tied to the performance of the fund.

Lackluster returns are adding to an already challenging fiscal environment for many universities. State appropriations to public colleges and universities remain roughly 15 percent below pre-recession levels, according to the State Higher Education Executive Officers Association. And the latest data from the National Student Clearinghouse Research Center shows a continued decline in both undergraduate and graduate enrollment.

“There are continuing pressures to keep tuition low, maintain academic quality at a time when the number of high school graduates who are available in many regions of our country is stagnant or declining,” Walda said.

Lawmakers have ratcheted up pressure on schools with sizable assets to spend more of their wealth to lower the cost of attendance. College endowments became a hot button issue in Congress last year, when members asked 56 private universities, each with endowments exceeding $1 billion, for information about the use of that money.

Rep. Tom Reed (R-N.Y.) also sponsored legislation that would force schools to devote 25 percent of their annual endowment income toward financial aid or risk losing tax-exempt status — an idea that President Trump heralded on the campaign trail. Although a House Ways and Means subcommittee held a hearing on endowments in the fall, House staffers say the issue has taken a back seat this year.

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