University of Iowa Foundation's investments lost 1.8% in the fiscal year ended June 30, said a performance summary report from the Iowa City-based foundation.
The report excludes benchmark comparison returns. The foundation oversees $898 million in assets. All returns are net of fees.
For other periods, all ended June 30, the foundation's fund returned 2.3% for the three months and 2.9% for the first six months of this year, while it returned an annualized 5.5% for three years and 5.2% for both five- and 10-year periods.
Broken out by asset allocation for the fiscal year, the foundation's global equity portfolio — made up of U.S. and non-U.S. public equities, hedge fund equity strategies, private equity and venture capital — lost 4.6%; global fixed income — which includes hedged funds and distressed debt — gained 1.6%; real assets — which includes real estate, master limited partnerships and hedge funds in long-only commodity futures — lost 1.2%; and diversifying strategies — made up of hedge funds — gained 0.9%.
“The endowment model's equity bias hurt performance during the fiscal year,” the report said. “As the low-growth, low-interest-rate environment moves into its eighth year, investors need to increase risk to achieve their respective return targets. This is typically when investors are led down the wrong path and that is likely when mispricing will occur. The (foundation's) portfolio remains highly liquid and ready to take advantage of market dislocations. … Strategies with heavy asset flows and short-term outperformance are unlikely to continue that trend over the long term.”
Jim Bethea, foundation vice president and chief investment officer, couldn't be reached for comment.
The University of Iowa, which oversees a $371 million endowment pool separately from the foundation, plans to release on Aug. 31 fiscal-year investment returns, said Tom Snee, university spokesman.