University of Kansas notches net 4.5% return for fiscal year

University of Kansas' $2.2 billion long-term investment program portfolio of endowment assets returned a net 4.5% for the fiscal year ended June 30, said James Clarke, senior vice president of investments and treasurer at KU Endowment, a nonprofit organization that oversees the endowment for the university.

The Lawrence-based university's return fell below its relative objective of 11.6% for the period, according to a performance report on its website.

For the three, five and 10 years ended June 30, the LTIP returned an annualized net 11.7%, 8.1% and 7.9%, respectively, above the respective relative objectives of 9.1%, 5.8% and 6.4%.

The investment pool had returned a net -2.8% for the fiscal year ended June 30, 2022.

The latest fiscal year's improved performance primarily benefited from "remaining fully invested in public equities, significantly underweighting fixed income and overweighting cash," Clarke said.

Public equities experienced a strong rebound during the year ended June 30. The Russell 3000 index returned 19% for the period, compared with -13.9% for the year ended June 30, 2022.

The LTIP's return for the most recent fiscal year exceeded the median return of 4.2% for the 12 endowments whose latest fiscal-year returns have been tracked by Pensions & Investments as of Oct. 5.

While KU Endowment did not provide specific return information for each asset class, Clarke said "private investments, which in recent years have powered much of the LTIP's outperformance, were caught in a desynchronized cycle as general partners were still writing down valuations from FY22's market correction," said Clarke.

He also noted that domestic and global public equities outperformed their benchmarks by 134 and 254 bps, respectively, this past year, the marketable alternatives (hedge funds) asset class returned a net 3.4%, just below its benchmark, and real assets rose 8.9%, 438 basis points above its benchmark, with an overweight to master limited partnerships the chief contributor to outperformance.

As of June 30, the actual allocation was 28% private investments, 18.4% marketable alternatives, 12.5% real assets, 9.3% domestic equities, 8.2% international equities, 7.5% global equities, 4.8% emerging markets equities, 4.3% opportunistic strategies, 3.7% fixed income and 3.3% cash equivalents.

The target allocation is 30% private investments; 16% marketable alternatives; 12% real assets; 8% each domestic equities, global equities and international equities; 6% each emerging markets equities and opportunistic strategies; 5% fixed income; and 1% cash equivalents.