Monday, 28 July 2014
Last updated 2 days ago
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."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…