University of Missouri System's $1.4 billion endowment pool returned 1.9% net of fees in the fiscal year ended June 30, said Thomas F. Richards, treasurer and chief investment officer of the Columbia-based university system, in an e-mail.
The return fell 60 basis points below the pool's benchmark. The best-performing asset class was private equity, which returned 15.4%, followed by real estate, at 13.6%.
Following those were hedge funds at 3.2%; global fixed income, 1.6%; global equity, 0.7%; bank loans, 0.3%; and high yield, 0.2%.
Risk parity lost 2.8%, emerging markets debt had a loss of 5.3% and inflation-linked bonds lost 10.5%.
In the three, five, seven and 10 years ended June 30, the endowment pool returned 10.2%, 10%, 5.8% and 6.5%, respectively.
Mr. Richards cited the strengthening of the U.S. dollar with its equity portfolio benchmarked to the MSCI ACWI Investible Market index as the “biggest challenge in the most recent fiscal year.”
“Historically, we have never hedged currency risk in our equity portfolios. We're currently evaluating the pros and cons of doing so — to whatever degree — going forward,” Mr. Richards said.
“One other point to highlight is an ongoing issue we've had with benchmarking our risk-parity allocation, which from talking with peers, is quite common. While our reporting indicates that risk parity 'underperformed' by 210 (basis points), that tracking error is attributable primarily to a naive benchmark and not reflective of our risk-parity performance vs. expectations,” he added.
As of June 30, the pool's actual allocation was 48% global equity, 12.8% hedge funds, 7.6% private equity, 6.5% opportunistic fixed income, 5.9% risk parity, 5.3% real estate/infrastructure, 4.9% emerging markets debt, 4.5% global fixed income, 3% inflation-linked bonds and 1.5% cash.
New target allocations, which were approved by the system's board of curators at its June 25-26 meeting, are 45.5% global equity, 10% each real estate/infrastructure and risk parity, 7.5% private equity, 7% opportunistic fixed income, 6% hedge funds, 5% emerging markets debt, 4% global fixed income, 3% inflation-linked bonds and 2% commodities.