A recent study conducted by NACUBO, National Association of College and University Business Officers, and investment adviser Commonfund, revealed that college and university endowments' average returns declined to negative 0.3 percent by the end of 2012 fiscal year, when compared to 19.2 percent in 2011 and 11.9 percent in 2010.

The companies surveyed 831 colleges and universities with total assets of more than $406 billion from July 1, 2011 to June 30, 2012.

Endowments are assets owned and invested by universities who generally spend 4 to 5 percent to support financial aid, faculty salaries and other expenses and then try to restock them through fundraising and investment returns.

"The long-term goal of most endowments is to exist in perpetuity and grow at the rate of inflation," Verne Sedlacek, Commonfund chief executive told Economic Times. "Universities have lost ground when you adjust for inflation."

In the past few years, with the rise in tuition prices, enrolments have declined, resulting in null or lesser revenues.

As a result, most of the universities depend on endowments to pay for maintenance activities and other improvement projects.

Sedlacek said that annual operating costs of an average university have also risen by 3.2 percent.

More than half of universities said they increased the endowment spending in previous academic year to support various activities.

"They are making up for other revenue that is not available for investment for the quality and improvement of institutions," Mr Walda said.

Meanwhile, investments in alternative assets, such as hedge funds, private equity, venture capital and commodities by universities did not prove effective with returns of just 0.5 percent compared with 14.1 percent in 2011.

Among the universities, Harvard's assets dropped 4.1 percent to $30.4 billion and Yale's endowment assets decreased by just 0.1 percent to $19.3 billion.

While the University of Texas System saw an increase in their endowments by 6.5 percent and Stanford University observed a rise of 3.2 percent.