University of Missouri endowment returns 11.3% for fiscal year

University of Missouri System's $2.4 billion endowment pool returned a net 11.3% for the fiscal year ended June 30, above its benchmark return of 9%.

For the five-, seven- and 10-year periods through June 30, the Columbia, Mo.-based endowment returned an annualized net 8.5%, 8.2% and 7.2%, respectively, compared with their respective benchmark returns of 7.5%, 7.5% and 6.5%, according to a performance report included with materials for the system's upcoming Sept. 12 board of curators meeting.

The endowment had returned a net 3.8% for the previous fiscal year ended June 30, 2023.

Also, the system’s $4.5 billion retirement plan returned a net 11.1% for the fiscal year, also topping its benchmark return of 8.8%.

For the five-, seven- and 10-year periods through June 30, the retirement plan returned an annualized net 8.1%, 7.8% and 7%, respectively, compared with their respective benchmark returns of 7%, 7.1% and 6%. (The retirement plan has been closed to new employees since 2019.)

In the endowment pool with respect to asset classes, the top one-year performers were public equity, which returned a net 19.1%; risk-balanced assets, 11.4%; commodities, 9.7%; private debt, 9.4%; private equity, 8.5%; cash/other, 5.9%; absolute-return strategies, 5.4%; inflation-linked bonds, 4.4%; and U.S. Treasuries, 3.3%.

The poorest performance came from real estate, which returned a net -9.1%.

In the retirement plan, the top one-year performers with respect to asset classes were public equity, which returned a net 19.2%; commodities, 11.8%; risk-balanced assets, 11.4%; private equity, 8.9%; private debt, 7.7%; cash/other, 6.7%; absolute-return strategies, 5.5%; inflation-linked bonds, 4.5%; and U.S. Treasuries, 3.2%.

The poorest performance came from real estate, which returned a net -6.4%.

The board will also be asked to approve certain changes to the target asset allocations of both the endowment pool and retirement plan.

For the endowment pool, under a proposal recommended by investment consultant Verus Advisory and the investment advisory committee called “Mix A,” the target allocations to risk-balanced assets, U.S. Treasury inflation-protected securities and U.S. Treasuries and would be eliminated — reduced to zero from targets of 12%, 10% and 8%, respectively; while the portfolio would have a new core fixed-income allocation of 10%.

Meanwhile, the target allocations for global equity would be increased to 38% from 35%; private equity would climb to 17% from 15%; private debt would edge up to 8% from 7%; real estate would slip to 9% from 10%; and absolute-return strategies would decline to 15% from 22%.

The 3% target for commodities would remain unchanged. Also, the -22% target to cash would be removed.

“Mix A,” the consultant advised, would not only increase allocations to global equity and private equity; but also simplify the portfolio by eliminating risk-balanced assets, U.S. TIPS and U.S. Treasuries; and move the asset allocation policy to be more closely mirror university endowment peers.

For the retirement plan, under a proposal also recommended by Verus and the investment advisory committee called “Mix B,” the target allocations for risk-balanced assets and U.S. TIPS would be eliminated (reduced to zero from targets of 12% and 9%, respectively); while the portfolio would have a new core fixed-income allocation of 9%.

In addition, the targets for U.S. Treasuries would jump to 20% from 8%; private debt would increase to 8% from 6%; real estate would be cut to 11% from 13%; and absolute-return strategies would ease to 20% from 22%. Also, the -22% target to cash would be increased to -20%.

Targets for global equity (34%), private equity (13%) and commodities (5%) would remain unchanged.

“Mix B,” the consultant said in the report, would help reduce investment risks, exceed return objectives, offer the lowest projected funding costs and simplify the portfolio through elimination of two asset classes and reduce leverage.