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College endowments are experiencing some whiplash


Some U.S. colleges and universities have endowments that rival the economies of entire countries, boosted in recent years by astronomical returns on their investments. But as NPR's David Gura reports, those returns are now falling back to Earth.

DAVID GURA, BYLINE: Schools have made mountains of money off their investments. And endowments really ballooned during the pandemic when stocks were on a record-setting run. Chris Brightman used to manage billions of dollars for the University of Virginia. Today, he's the CEO of the investment firm Research Affiliates.

CHRIS BRIGHTMAN: Endowments reported, you know, let's call it anywhere between 25 to 30% positive returns, up to greater than 50%.

GURA: Which is massive. Harvard's endowment grew to two times the size of Iceland's GDP. And while schools have funneled some of that money into scholarships, it's also paid for luxe dorms and gleaming gyms, some with climbing walls. But endowments are sharing how they did in the last fiscal year, which ended in June. And in a matter of months, there's been this dramatic swing from those double-digit percentage gains to losses, which will lead to some introspection on college campuses.

BRIGHTMAN: There's going to be the inevitable pressure to say, what are we doing wrong? And why aren't we keeping up?

GURA: To be fair, a lot of this has to do with the stock market. During that fiscal year, the S&P 500 fell by more than 10%. And the Nasdaq fell by about 23%. But endowments don't just invest in stocks and bonds. They're in private equity and venture capital, commodities. That's because they've embraced risk as they've tried to make more money. And Chris Brightman says that makes it harder to know how they're doing.

BRIGHTMAN: There's just a whole array of private funds that are investing in assets that are not publicly traded and therefore don't have a readily apparent market value.

GURA: Which could spell trouble down the line if those riskier investments tumble. Endowments face uncertainty that could last a long time. Cornell is among several schools that swung from record-setting returns to losses. And the head of its investment office warned in a statement, the likelihood of an extended period of lower returns appears heightened.

David Gura, NPR News, New York.

(SOUNDBITE OF LAKEY INSPIRED'S "REMINISCE") Transcript provided by NPR, Copyright NPR.

Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.