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Endowments

Oxford University endowment returns 16.4% in 2016

Oxford Endowment Fund, Oxford, England, returned 16.4% over the year ended Dec. 31, bolstering assets by 23.3% to 2.34 billion ($2.9 billion).

The latest annual report, published by Oxford University Endowment Management, an Oxford University subsidiary and manager of the assets, said the fund had returned an annualized 11% over the three years ended Dec. 31 and an annualized 11.8% return over the five-year period. It returned 7.6% in 2015.

The fund has a 44.1% allocation to equities, which returned an annualized 11.7% over three years ended Dec. 31. Over five years, equities returned an annualized 13.9%.

A 24.5% allocation to private equity gained an annualized 23.7% over three years and 20.5% over five years.

Credit returned 15.8% on an annualized basis over three years and 14% over five years. The fund has a 10.4% allocation to credit. Real estate exposure of 6.5% returned 9.1% annualized over three years and 9.2% over five years.

The remainder of the portfolio is allocated 13.5% to cash and bonds, and 1% to other assets. One-year returns were not available.

The annual report said 2016 "frequently reminded (executives) of the need to manage macroeconomic and political risks." The investment team's approach to risk management is not to spend significant time forecasting the outcomes of "inherently unstable events," but rather ensure an appropriate balance of opportunities and protections in a range of developments, it said.

"The most significant risk for U.K. investors last year was the (European Union) referendum vote. We spent time understanding the potential impact of this specific binary event, and planned clear practical outcomes for either result. Further to our analysis, we came to the conclusion that in the event of an 'out' vote, sterling would be the release valve and hence move our currency exposure to the lower end of its permitted sterling range" of 40% to 70%.

Following the result, executives "moved quickly to add capital to public markets, which fell significantly, using our position as long-term investors to take advantage of a market overwhelmed by short-term fear."