CAIA Corner: Walk Like an Endowment
|Nov 21st, 2011 | Filed under: Featured Post | By: Guest||
The sixty largest US college endowments (those with over $1 billion in assets) once again have chart-topping performance. After suffering drawdowns and liquidity issues in 2008 and2009, these large endowments earned average returns of 12.2% in the fiscal year ending June 30, 2010, the latest period available, which beat the returns of smaller college endowments over the same period. Ten year annualized returns of 5.0% refute the idea of a lost decade, and the three-year drawdown of an annualized -3.5% from 2008 to 2010 seems relatively benign, at least when viewed in the rearview mirror.
According to the NACUBO-Commonfund Study of Endowments, the world’s largest college endowments continue to increase their allocation to alternative investments. Year after year, allocations to domestic equities decline as allocations to alternative investments and international equities increase. On June 30, 2010, these endowments held 11% in US equity, 15% in international equities, 14% in fixed income and cash, and 60% in alternative investments. As alternative asset allocations have exploded since 2002, hedge fund allocations grew from 17.8% to 22.8%, private equity and venture capital raised allocations from 8.2% to 19.2%, and natural resources saw dramatic increases from 1.7% to 8.4% of endowment portfolio holdings. Yes, these highly successful investors now allocate more to international equities than US equities, more to hedge funds than fixed income, and more to private equity and venture capital than domestic public equities…
By Keith Black, PhD, CFA, CAIAAssociate Director of Curriculum.
- CAIA Corner: The Keys to Successful Investing by Endowments and Foundations
- Average College Endowment Performance Improves and Size Matters
- “Illiquidity Premium” that fuelled endowment returns falls back to 2005 levels
- Wall Street “undermined endowment stewardship” according to new report
- Going Public: Endowment performance at our great state universities