Graphic: Endowments with more alts reap stronger long-term returns
Larger endowments, with their higher allocations to alternatives, such as private equity and real estate, were knocked when those asset classes faltered in the latest fiscal year. However, over longer periods of time, alternatives have helped the bigger endowments produce higher returns than their smaller counterparts.
A taste for alts: An endowment's allocation to alternatives increased with its size, according to NACUBO. Endowments with more than $5 billion in assets allocated more than 65% to alts, while those with less than $50 million had a 13% allocation. Across all endowments, the largest allocation to alts was, generally, to private equity.
Total allocation by endowment size
More international equity: Larger endowments also favored non-U.S. equities. Those with $5 billion-plus in assets had 34% of their equity allocation in U.S. equities, 17% in developed countries' equity, 20% in emerging markets, and 29% in global equities. Endowments with less than $50 million in assets had more than two-thirds in U.S. stocks.
Equity allocation by endowment size
Beating 60/40: Over the past 10 years, median endowment returns have bested a global 60/40 portfolio. Returns ranged from 6.4% to 9.4%, vs. 5.3% for a 60/40 portfolio.* Larger endowments generated higher returns over longer periods, except for last year, when size was inversely related to returns.
Endowment returns vs. global 60/40 portfolio
*Represented by the MSCI ACWI and Bloomberg Global Aggregate Bond indexes.
Sources: The National Association of College and University Business Officers-Commonfund study, Bloomberg
Sponsored
White Papers
Sponsored Content
Partner Content