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Endowments and Foundations

Hedge funds are Columbia’s biggest bet in $10 billion endowment

Columbia University subway stop

Columbia University's $10 billion endowment has invested a third of its assets in hedge funds at a time when other large investors are chasing low-cost passive funds.

The fund had 33% of its portfolio in hedge funds as of June 30, when its fiscal year ended, according to a bond document. The allocation was the Ivy League school fund's largest, followed by 22% in global equities and 20% in private equity, according to the document.

Institutional investors have been warming to hedge funds after a reluctance to commit capital following years of underperformance and high fees. Stock hedge funds, in particular, have lost their sheen among investors as they move toward cheaper, passive index funds.

The University of California recently increased its passive investments to 17% of its portfolio, up from 5% after purging 72 external money managers.

Among endowments with more than $1 billion, the average allocation in "marketable alternatives," which includes hedge funds, derivatives and other illiquid strategies, was 19% as of June 30, according to the National Association of College and University Business Officers.

In fiscal 2015, the last time the New York-based Columbia reported its asset allocation, 29% was in "absolute return," which includes hedge funds. The fund had 24% in private equity and 19% in global equities in the same period. For fiscal 2017, hedge funds were listed as a separate asset class, according to the document.

Robert Hornsby, a Columbia spokesman, didn't have an immediate comment.

Columbia's 13.7% return in fiscal 2017 was third-highest among the eight-member Ivy League, and its 10-year investment return of 7.3% was the best in the group, according to data compiled by Bloomberg.