A glimpse into the secretive world of large U.S endowment funds reveals strong, benchmark- and index-topping returns of their hedge fund portfolios.
Just six of the 25 largest U.S. endowments provided publicly available, detailed financial information for June 30, the fiscal year-end for many endowments. In examining that information, Pensions & Investments found the six had a collective $89 billion in assets as of June 30, of which $18.4 billion was in hedge funds.
Harvard University, Cambridge, Mass., had the most total endowment assets — $32 billion — but the smallest percentage hedge fund allocation, 16% of assets.
University of Virginia, Charlottesville, with $5.3 billion in endowment assets, had the highest hedge fund allocation — 30.4%.
Of the four that report aggregated hedge fund portfolios, New Haven, Conn.-based Yale's $3.3 billion portfolio performed the best, with a 12.7% return for the fiscal year ended June 30. Yale's endowment had $19.9 billion in assets as of June 30.
Coming in a close second was the Austin-based University of Texas System endowment's $5.9 billion hedge fund portfolio, with a 12.5% return. Third, at 12.3%, was the $1.6 billion hedge fund pool of the University of California, Oakland. The endowment had total assets of $6.7 billion. Harvard's $5.2 billion hedge fund portfolio returned 11.6% for the year.
The $4.9 billion endowment of Cornell University, Ithaca, N.Y., and the UVA endowment report returns separately for the multiple hedge fund portfolios within their funds.
(For comparison, the HFRI Fund Weighted Composite index returned 11.5% and the HFRI Fund of Funds Composite index returned 6.7% for the 12 months ended June 30, while the Standard & Poor's 500 index returned 30.7% and the Morgan Stanley Capital International World index, 31.2%. The Barclays Capital Aggregate Bond index returned 3.9% for the same period.)
The University of California endowment's hedge fund return trounced its internal benchmark by 980 basis points for the year ended June 30; the University of Texas topped its benchmark by 600 basis points; and Harvard, by 200 basis points. Yale's investment office doesn't reveal the benchmark applied to its hedge fund portfolio.
The University of Texas Investment Management Co., Austin, manages a total of $7.5 billion in hedge funds when non-endowment investments managed for the UT system are included, Bruce Zimmerman, UTIMCO's CEO and chief investment officer, said in an interview.