What Really Drove Losses at Four Major Endowments

Technology, emerging markets, and stocks dragged down performance at some of the most respected endowments.

Illustration by II

Illustration by II

It’s no surprise that many endowments have had a tough year. But the reasons these organizations struggled weren’t all the same, as revealed by a new deep dive into the asset allocations of four of the funds.

Research provider Markov Processes International pulled data exclusively for Institutional Investor on the most recent performance at Brown University, Columbia Investment Management Company, Bowdoin College, and Massachusetts Institute of Technology Investment Management Company.

The data revealed that while allocations to private equity and real assets contributed to the upside for all four organizations, the endowments diverged on the downside.

Take Brown University for example. Although it has been a long-time top performer, the endowment lost 4.6 percent in the most recent fiscal year.

“Brown was propelled to the top spot by investing in technology-focused hedge funds,” said Michael Markov, founder of MPI. “This year that is biting them.”

His analysis showed that a large allocation to technology — across all asset classes — contributed an estimated loss of 2.56 percent to the portfolio.


MPI uses a returns-based-style analysis that takes annual performance data, along with allocations tracked over time, to estimate an investor’s exposure to asset types or classes. Markov noted that the analysis doesn’t identify individual managers or positions, but rather it estimates how asset classes contribute to performance over time.

The research provider found that Columbia faced different challenges this past year. The $13.3 billion university endowment lost 7.6 percent through June 30.

MPI’s analysis attributed 3.39 percent of Columbia’s total losses to emerging markets equity. Bonds, meanwhile, accounted for an estimated 1.57 percent of the total.

As for Bowdoin, the $2.5 billion endowment lost 7.1 percent, with most of its negative performance attributable to emerging markets equity and stocks more generally, according to MPI.

“They have a huge U.S. equity allocation,” Markov said. “Bigger than the others.” He estimated that Bowdoin lost 1.53 percent on its developed markets stocks, and 2.31 percent on its emerging markets equities.

Bowdoin also may have gotten lower returns from private investments. MPI estimates the endowment’s returns were likely dampened by a concentrated — and losing — investment in venture capital.

And 1.19 percent of Bowdoin’s losses were unexplained by asset class declines, according to MPI.

“Sometimes it shows up in the analysis,” Markov said. “It’s a one percent unexplained loss. We call it selection. It’s manager specific. It’s not explained by the major asset classes.”

MITIMCO’s fiscal year story was a blend of what the other endowments faced. Posting its first loss since the Global Financial Crisis, MIT lost 5.3 percent for the year. The $24.6 billion endowment’s negative returns were driven by foreign stocks and technology, according to MPI.

An estimated loss of 2.29 percent in foreign equities, and a 1.5 percent loss in technology accounted for negative returns, the data showed. “MIT is very well diversified,” Markov said. “We saw that in our analysis.”