University endowments and non-profits in the U.S. are seeing lackluster annual returns for a year when the stock market garnered 10%.

Funds with more than $500 million earned a median 5.3% before fees in the fiscal year ended June 30, while endowments of all sizes returned 5.9%. That’s the lowest since 2015, according to results published Tuesday by Wilshire Trust Universe Comparison Service.

“It’s better than losing money, but it’s not good news,’’ said Robert Waid, a managing director at Wilshire Associates. “The larger question is, ‘How do you have this under-performance when equities and fixed income did so well?’ Even private equity or private debt should have similar returns as the public markets.’’

Colleges in recent years have piled into alternatives such as private equity and hedge funds to bolster returns. Among the largest endowments, allocations to alternatives average 43%, according to Wilshire. Smaller endowments put less in alternatives.

Traditional markets have fared better of late. A 60/40 benchmark for stocks and bonds gained 9.1% in the 12 months ended June 30, according to Wilshire.

Schools generally seek to earn at least 7% annually to account for spending rates -- which fund professor salaries and financial aid -- of 4% to 5% plus inflation. They have increasingly turned to alternatives like private equity, which typically pay a premium for illiquidity.

Colleges, with about $615 billion in assets, invest for the long term. On that basis, endowments are still hitting the mark. The 10-year return for funds over $500 million is 9.3%. For endowments overall it’s 9%.

A 10-year-return of 9% will pay the bills, but if market conditions like this persist, schools may need to rethink how much they’re spending, said Karl Scheer, chief investment officer of the University of Cincinnati’s $1 billion portfolio, which is expected to return between 5% and 6% for the year ended June 30.

“To protect their endowment, schools may need to spend less,’’ said Scheer, who doesn’t plan to make any immediate changes to his school’s asset allocation based on returns. “The math doesn’t work.’’

Individual schools begin posting their returns, usually net of fees, in September.

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