A year after the investments of most higher-education endowments lost money, colleges and universities are back in the black.

Institutions reported an average total return of 2.9 percent for the fiscal year that ended June 30, according to preliminary results of the Commonfund Benchmarks Study, which were released last week. By comparison, during the 2001-2 fiscal year, the typical endowment posted a return of negative 5.4 percent.

"The endowments of U.S. educational institutions have turned the corner," said John Griswold, executive director of the Commonfund Institute, which drew on a survey of 122 institutions to compile the study.

The smallest endowments -- those with assets of less than $10-million -- reported the strongest average returns, 4.7 percent. Large endowments, valued at $1-billion or more, posted average returns of 2.3 percent.

In most years, large endowments do better than small ones, but the strong performance of the stock market in recent months gave an edge to portfolios with large allocations to public equities. Small endowments typically put more of their assets into stocks than do larger ones.

Among other things, the study found that 51 percent of endowments changed their asset allocations last year, compared with 29 percent the year before. The portion of assets allocated to alternative investments, such as hedge funds and venture capital, declined to 11 percent from 15 percent.

About 68 percent of institutions in the survey reported that they expect their endowment's spending rates will remain unchanged for the remainder of the current academic year.

On other fronts, gift income increased last year at 42 percent of the institutions surveyed, but dropped at 35 percent. And approximately half of the institutions reported that they had cut their budgets last year.

The Commonfund Institute is the research arm of Commonfund, which manages funds for colleges, universities, and other nonprofit institutions. The institute plans to release the full results of its endowment study in January.