Don't underestimate the ability of large university endowments** to catch up, Anson points to a "lag effect" where it takes some time for the performance of the public market to manifest itself into private investment.
The little ones pay off hugely.
In the 12 months ended June 30, 2023, university endowments with assets under $50 million averaged 9., driven by a strong force, according to a study released last Thursday8%。
Large university endowments with assets of more than $5 billion** averaged only 2 percent over the same period8%。Weighing on performance were large positions in alternative investments such as private equity and venture capital, which were either flat or slightly declining during the period.
Mark Anson, chief executive of asset manager CommonFund, said: "The more listings you make, the better the returns. The company conducted the study in conjunction with the National Association of College and University Business Officers (NACUBO).
University endowments of all sizes** returned an average of 77%, but lagged the S&P 500 by 19 over the same period6% increase. This is since FY2022, after university endowments had returned an average of negative 8%. The study covers 688 university endowments** with total assets of $839.1 billion.
The study noted that the last nine months of the financial year provided the biggest boost to university endowment** performance, as both ** and fixed income yields were low in 2022.
Smaller university endowments** tend to stick to investment listings**, while larger university endowments favor private equity, hedging** and venture capital. However, there is a lot of interest in alternative investments. Research shows that university endowments of all sizes** account for 17% of their portfolios in private equity,159% is hedged**, 119% is venture capital, while only 125% invested in the U.S.**, with a similar holding breakdown as the previous year.
Harvard's $50.7 billion endowment** is the largest university endowment in the U.S., achieving 2With a return of 9%, the investment manager noted in October that it was underperforming in alternative investments.
But don't underestimate the ability of large university endowments** to catch up on performance. Anson points to a "lag effect" in which it takes some time for the performance of public markets to manifest itself in private investment. Over the past 10 years, large university endowments** have seen an average annual return of 91%, compared to an average annual return of 7 across all asset classes and investment strategies2%。
Rising expenses cut into investment income, and in the current fiscal year, universities drew $28.4 billion from endowments**, up 8.8 percent year-over-year4%。The average annual consumption rate is 47%, up from 40%, while total endowments were $13.3 billion, down from $14.9 billion in fiscal 2022.
Most of the expenditures go to financial aid, and the rest is for academic programs, research, faculty positions, and the operation and maintenance of the facility.
Text |Mary Romano
Edit |Kang Guoliang
Copyright Notice: Barron's original article, without permission, may not**. For the English version, see "Small University Endowments Won Out Last Year." on February 15, 2024 how they did it.”。
The content of this article is for informational purposes only and does not constitute investment and financial advice of any kind; The market is risky and investors should be cautious. ）