College Endowments See Returns Plummet In FY2012

Feb 4 2013 | 2:10pm ET

U.S. college and university endowments saw their average returns plummet in fiscal 2012, losing 0.3% compared to a gain of 19.2% in FY2011.

The figures are found in the latest NACUBO-Commonfund Study of Endowments which evaluated data from 831 colleges and institutions (306 public and 525 private) representing assets worth $406.1 billion.

Alternative investments returned 0.5% for endowments in fiscal 2012 (from July 1, 2011 to June 30, 2012). This was neither the best nor the worst performance by an asset class—those distinctions went to fixed-income investments, up 6.8%, and international equities, down 11.8%, respectively.

This year's data show institutions increased their allocation to alternatives by one percentage point to 54%  in FY2012. It also showed the larger the endowment, the bigger the allocation to alternatives: endowments in excess of $1 billion reported a 61% allocation to alternative strategies.

Those strategies included private equity (LBOs, mezzanine, M&A funds and international private equity); marketable alternatives (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives); venture capital; private equity real estate (non-campus); energy and natural resources (oil, gas, timber, commodities and managed futures); and distressed debt.

Longer-term, the endowments recorded better results: 10-year returns for FY2012 were 6.2%, up from 5.6% in  FY2011. Trailing three-year returns averaged 10.2% and trailing five-year returns averaged 1.1%.

The largest endowments, those with $1 billion or more, were the best performers in FY2012, returning 0.8%. Institutions with assets between $51 and $100 million reported the worst results, losing 1.0%.

"This year's data show the re-emergence of a number of long-term trends in the sector," said NACUBO President and CEO John D. Walda and Commonfund Institute Executive Director John S. Griswold in a joint statement. "Over the years, with the exception of periods such as the recent economic crisis, institutions with the largest endowments have reported the highest one-year returns. This trend can once again be seen in this year's data, as well as data for trailing periods. We attribute this outperformance to a number of factors: well diversified portfolios with an equity bias, the ability to make long-term commitments to less liquid strategies, access to top-tier investment managers, and greater resources, including larger staffs, leading-edge technology and experienced investment committees."


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.