Preliminary Data Show Educational Endowments’ Investment Returns Averaged 15.8 Percent in FY2014
"With only a few exceptions, higher relative performance by the largest endowments is in keeping with the findings of our studies over more than a decade," commented Commonfund Institute Executive Director John S. Griswold. "Smaller endowments, which typically have the largest allocations to traditional asset classes, benefited from the strong performance of liquid domestic and international equities beginning in 2009. But the greater diversification practiced by the largest endowments and their emphasis on a variety of sources of return, both public and private, tends to result in higher long-term investment performance."
"These higher returns will be a great benefit to students and faculty at colleges and universities," added John D. Walda, NACUBO president and chief executive officer. "Additional resources generated by endowments will continue to help fund vital research, financial aid, and other programs at our institutions."
Griswold also noted that good returns over an extended period are a welcome development for educational endowments. "The Studies have reported double-digit gains in four of the past five years, giving endowments a chance to rebuild after the erosion caused by the losses reported in FY2008 and FY2009," he said.
Increased Allocations to Alternatives
Among additional findings, preliminary study data indicate that colleges and universities are continuing to increase allocations to alternative strategies (which include marketable alternatives, private equity, venture capital, natural resources, distressed debt and private equity real estate). The allocation to alternative strategies grew to an average of 58 percent among the early reporting institutions and to 65 percent among institutions with assets over $1 billion. Last year, alternative strategies accounted for an average of 53 percent of endowment portfolios, a one percentage point decline from the previous year.
Returns by Asset Class
No asset class, strategy or sub-asset class/strategy had a negative return in FY2014, according to the preliminary data. The following table shows FY2013 and FY2014 returns broken out by major asset class: