At a time when the larger economy is being described as having left the Great Recession behind, endowments at the big public universities are reporting the worst returns since 2009--a year when the Great Recession was in full swing.

Seven big public universities whose endowments have over $1 billion in assets reported loses in fiscal year 2016. The University of California blamed lackluster economic growth and volatility for its endowment losses. California and the University of Ohio both lost 3.4%, followed by the University of Colorado with 2.5% and the University of North Carolina with 2.0%. The University of Iowa reported a 1.8% drop and the University of Washington and the University of Virginia had roughly 1.5% declines.

Funds with more than $500 million lost a median 0.73% this year through June 30, according to the Wilshire Trust Universe Comparison Service, which reported data on the big public schools. The Wilshire data, drawn from fund custodians, excludes fees while most schools report returns with fees factored in.

"It was a bit of a bloodbath, as swings in the markets challenged stock pickers," Jagdeep Bachher, chief investment officer at the University of California system, said at an investment committee meeting on September 9. "Last year was a bad year for active managers all around."

But fiscal 2016 was not anomalous. "We have seen much lower investment returns for all endowments over the past several years," said Kenneth Redd, director of research and policy analysis at NACUBO, the National Association of College and University Business Officers. "In fiscal year 2015, we reported an overall investment gain of just 2.4%, and in 2012, endowments on average returned a negative 0.3%"

"These lower returns reflect market volatility, particularly in Europe and Asia," Redd continued. "They also reflect the continued slower-than-expected economic growth in the United States."

Fluctuating commodities took a toll. "Volatility has been even more pronounced in the markets for oil, gas and other commodity investments," said Redd, "which have declined substantially."

Yet schools have taken the commodities plunge across the board. "Both public and private schools with endowments of over $1 billion have seen even greater investment challenges because they are much more heavily invested in commodities, natural resources and other illiquid assets," said Redd, "which have continued to do very poorly in comparison to U.S. stocks and bonds. FY 2015, our most recent year of complete data, public and private schools with more than $1 billion in endowment assets had about 57% of their endowment assets invested in hedge funds, commodities, natural resources, and other so-called alternative investment strategies."

Natural resources--mainly oil and gas--had a return of negative13.3% in FY15, and commodities returned negative 17.7%.

"These declines hurt large endowments much more than smaller ones," Redd said, "because the larger endowed funds have a much higher concentration of their investments in these funds."

Concerning the Wilshire TUCS findings, Mark Kantrowitz, publisher and vice president of strategy at Cappex.com said, "Note that this data concerns the rate of return on investment, not endowment spending nor endowment contributions. Also, since TUCS does not subtract management fees, the losses are probably greater than what they are reporting."

"It is hard to characterize the cause of the losses because the public does not have access to data concerning the holdings of university endowments," he said. "But in general, this has not been a good year for active management, in part because the market has been moving horizontally, in part because of tepid action by the Federal Reserve."

Still, Kantrowitz saw a silver lining amid gathering clouds. "In a way, these losses are beneficial to colleges, since Congress and other policymakers are starting to take a look at whether colleges are spending enough from their endowment on aid. Private foundations are required to spend 5% a year, while university endowments are not, and most colleges fall below that threshold. There have been proposals to require colleges to spend more. Endowment losses are a good way of countering that pressure."