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Alternative Market Briefing

Endowments recover returns in 2013 - NACUBO-Commonfund Study of Endowments

Wednesday, January 29, 2014

Bailey McCann, Opalesque New York:

The annual NACUBO-Commonfund Study of Endowments, shows that FY2013 was a strong recovery year for endowment portfolios, coming off the -0.3% return reported for FY2012. Total returns were 11.7% net of fees - a closely watched number as endowments not only fund school budgets but also reflect the overall results of significant allocations to hedge funds and alternative investments.

This is the fifth year for the study, which acts as a league table of sorts for the nations top schools. The study represents 835 US institutional participants and total endowment market assets of $448.6bn. The average endowment of U.S. institutions was $539.8m, and the median $97.6m.

The key take away for hedge funds is that the rebound this year shows that overall, the endowment model of allocations to hedge funds still works. Report data shows that over ten years, endowments of all size categories produced much higher returns than the 60/40 S&P/Barclays Blend allocation (60% Stocks, 40% Bonds). Since 2003, report data shows that save for a few flat/down years ('08, '09, 12) the 11.7% return of this year reflects a return to more typical performance. Overall, the asset allocation (see below) mix remains mostly the same although there has been some movement away from fixed income and alternatives, which may reflect some defensive positioning as a result of the start of taper.

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