The previous year's excellent results were what NACUBO and TIAA called a tale of two markets, with an extraordinary second half of the fiscal year pushing returns to near-record levels.
"This year's study also reflects a tale of two markets but in the opposite order," said Jill Popovich, senior managing director, regional general manager at TIAA, in an online presentation Thursday. "In the fiscal year's first half, positive economic tailwinds drove equities higher. (In the second half), inflationary pressures and other factors forced most major investment indices down sharply."
For the year ended June 30, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned -13.9% and -10.3%, respectively, in sharp contrast to returns of 44.2% and 4.6% for the year ended June 30, 2021.
However, despite the negative returns, endowment assets did not experience a proportional decline. The 678 institutions participating in the survey reported total assets of $807 billion as of June 30, down only 4% from a year earlier.
"These negative returns were offset by an increase in gifting levels," Ms. Popovich said. "Gifting was strong in 2022 relative to 2021."
All endowment size cohorts had negative returns for the fiscal year ended June 30, with endowments with more than $1 billion in assets posting the highest returns with an average -4.5% for the period, while the smallest endowments — those with less than $25 million in assets — had the lowest average return at -11.5%.
Ms. Popovich said larger endowments benefited from higher allocations to private equity. Endowments with more than $1 billion had the highest average allocation to private equity at 18.1%. That allocation declines with each successive smaller cohort. Among endowments with between $501 million and $1 billion in assets, that average allocation is 15.2%; among endowments with between $250 million and $500 million, 12%; $101 million to $250 million, 8.9%; $51 million to $100 million, 7.5%; $25 million to $50 million, 3.6%; and under $25 million, 0.5%.
Among all endowments, the average allocation was 30% private equity/venture capital, 28% public equities, 17% marketable alternatives, 12% real assets, 11% fixed income and the rest in other assets.
The study also showed that endowments' commitments to environmental, social and governance investing is growing. Just over 86% of survey respondents said their investment policies include some kind of ESG principles, up from 80% in last year's survey. Within current investment activities, the study said 18% of survey respondents currently include responsible investing criteria within current investment activities while another 18% are considering including it.
The study is a partnership between NACUBO and TIAA. The survey was conducted from Sept. 8 through Dec. 9.