Smallest endowments gained 9.8% while larger ones only gained 2.8%

  • Smallest university endowments gained 9.8% on average in the past year
  • Larger endowments with over $5 billion in assets only gained 2.8%
  • Performance drag for larger endowments came from investments in alternatives
  • Funds of all sizes returned 7.7% on average in the fiscal year
  • Smaller funds tend to stick with equities, while larger funds favor alternatives
  • Harvard University’s endowment gained 2.9% in the fiscal year

Small university endowments with assets under $50 million outperformed their larger counterparts with over $5 billion in assets in the past year. The smaller endowments gained an average of 9.8%, fueled by a strong stock market. On the other hand, the larger endowments only eked out lackluster returns of 2.8%. The underperformance for larger endowments can be attributed to their investments in alternatives such as private equity and venture capital, which either remained flat or experienced moderate declines. In contrast, smaller funds tended to stick with equities, which performed better. Overall, funds of all sizes returned an average of 7.7% in the fiscal year, but still trailed the S&P 500 index’s 19.6% rise in the same period. Despite the current performance gap, big endowments have historically posted higher average returns over the past decade. However, rising expenses and increased withdrawals from endowments are cutting into gains for universities. Schools withdrew $28.4 billion from their endowments in the fiscal year, a year-over-year increase of 8.4%. The average annual spending rate also increased to 4.7%. Gifts to endowments decreased compared to the previous year. The majority of endowment distributions went towards financial aid, academic programs, research, faculty positions, and facility maintenance.

Public Companies:
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Key People: Mark Anson (CEO of Commonfund)

Factuality Level: 7
Justification: The article provides information about the performance of university endowments based on a study released by Commonfund and Nacubo. It includes data on the returns of different-sized endowments and the factors that influenced their performance. The information is specific and based on the study, but it lacks additional sources or perspectives to verify the claims made. Overall, the article provides factual information but could benefit from more context and analysis.

Noise Level: 6
Justification: The article provides information on the performance of university endowments based on their size and investment strategies. It includes data on returns and allocation breakdowns. However, it lacks in-depth analysis and does not provide actionable insights or explore the consequences of the findings.

Financial Relevance: Yes
Financial Markets Impacted: The article provides information on the performance of university endowments, which may impact the financial markets and asset managers.

Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article discusses the returns of university endowments and their allocation strategies, which are relevant to financial markets and asset managers.

Reported publicly: www.marketwatch.com