The estimated average return for large endowments — those having more than around $900 million — is a little less than 16% for fiscal 2014, driven by double-digit returns in listed equities and private equity. For the year ended June 30, global equities returned 24.8% as measured by the MSCI World index. For the nine months ended March 31, private equity returned 15.5% as measured by the Cambridge Private Equity index. Generally, private equity returns do not reflect publicly traded equity movements. Therefore, we added 70% of the return for the S&P 500 for the second quarter of 2014 to bring the estimated return of private equity to around 19.7% for the 12 months ended June 30.
On average, listed equities represented 33.9% of an endowment's portfolio at the end of fiscal 2013. With an average allocation of 16.8% at the end of fiscal 2013, private equity was the third largest allocation of large endowments.
Other alternative investments should contribute to the positive performance of endowments in fiscal 2014. Hedge funds, as measured by the HFRI Fund Weighted Composite index, returned 9.1% for the year ended June 30. Hedge funds had the second largest average asset allocation, at 19.6%, at the end of fiscal 2013.
Real assets, which include real estate, returned an estimated 10.7%. At the end of fiscal 2013, real assets on average represented 14.2% of a large endowment's portfolio.
The performance of core U.S. fixed income had a reversal in 2014. As measured by the Barclays Aggregate index, fixed income rose 4.4% for the year ended June 30. The average large U.S. endowment had a 9.7% allocation to fixed income. Cash, which returned 0.04% for the year as measured by the Citigroup 3-month Treasury bill index, had an average allocation of 1.9% at the end of fiscal 2013.
Several endowments and foundations that release quarterly investment performance information have shown strong returns for through March 31. Indiana University Foundation, University of Washington and University of Arkansas Foundation Inc. returned 12.6%, 11.1% and 10.9%, respectively, for the three quarters ended March 31.