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Alternative Market Briefing

Endowments average 15.5% return in FY2014

Friday, January 30, 2015

Bailey McCann, Opalesque New York:

Educational endowments, some of the leading investors in alternatives, averaged 15.5% return for FY2014, according to the latest NACUBO-Commonfund Study of Endowments. This is an increase over FY2013, which saw 11.7%. In total, the study looks at 832 institutions representing some $516 billion in assets.

Domestic equities generated the highest returns for portfolios, coming in at 22.8 percent followed by international equities, at 19.2 percent. Alternative strategies returned 12.7 percent, fixed income returned 5.1 percent and short-term securities/cash/other returned another 1.9 percent.

Of the alternative strategies, hedge funds returned 9.9% and commodities and managed futures at 7.9%. Private equity strategies fared better with venture capital posting the highest return at 23.3% followed by traditional private equity at 16.5%.

Endowments in the study are broken down by asset size and compared to their peers.

Risk management

An increased emphasis on risk management within endowments is having a positive impact on the returns noted above and over the long-term projected returns. "We have observed a clear increase in the number of institutions employing risk limits and guidelines and applying stress tests in managing their portfolios," said Commonfund Institute Executive Director John S. Griswold. "Institutions appear to be remaining vigilant with an eye to avoiding a repetition of their experience in the fina......................

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