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How Ivy League Endowments Performed in Fiscal 2018
Princeton University was the top performing endowment in a year that saw gains driven by investments in private equity and venture capital.
Princeton University is the best performing Ivy League endowment in fiscal 2018, beating investment gains at seven other elite universities.
Princeton returned 14.2 percent in the 12 months ending June 30, with the endowment’s value jumping about $2.1 billion from a year ago to $25.9 billion, according to its announcement this week. The performance was stronger than in fiscal 2017, when Princeton returned 12.5 percent and was solidly middle-of-the-pack compared to other university endowments, according to Markov Processes International, a quantitative analysis firm that measures Ivy League returns each year.
This year’s gains were driven by alternative investment strategies. Ivy League asset managers have been ramping up allocations to alternative asset classes in recent years in hopes of outperforming broad market indexes.
“What we definitely see is that the funds that were highly exposed to private equity and venture capital did very well,” said Jeff Schwartz, president of Markov, by phone Thursday.
All eight of the university endowments managed to beat Markov’s benchmark, which uses a 60/40 allocation strategy to track the S&P 500 and Bloomberg Barclays US Agg Bond Index, according to a spokesperson for Markov. The firm's benchmark shows a return of 8.4 percent for fiscal 2018, gains calculated without an inclusion of fees, the spokesperson said.
Columbia University, which was the last of the Ivy League schools to report fiscal 2018 returns, gained 9 percent for the year, according to a Bloomberg report on October 10. The university’s press office did not return a phone call and email seeking confirmation.
The results were surprising for Schwartz, as Markov had projected that the university would return 15.3 percent and would trail only Princeton in its returns. Columbia's endowment returned 13.7 percent in fiscal year 2017, making this year's return even more of a surprise, he said.
“Columbia was a notable exception in terms of consistency between this year’s and last year’s performance,” said Schwartz. “It was probably the biggest loser in that sense.”
This is the first full year that the university’s investment management office has had Peter Holland at the helm. In 2016, Holland replaced Narv Narvekar, who is now the chief executive officer of Harvard’s Investment Management Co.
Harvard managed to boost returns from the prior year. The endowment returned 10 percent for fiscal year 2018, according to a spokesperson for Harvard. That's up from an 8.1 percent return in fiscal 2017, according to the university endowment annual report for that year.
“As is well known, HMC, as an organization, and the endowment portfolio are still in the early stages of a multi-year transition, with much work ahead,” Narvekar said in a memo to Harvard Community members last month.
[II Deep Dive: Harvard Endowment Gains 8.1% Under New CEO]
Meanwhile, Cornell University’s endowment returned 10.6 percent in fiscal 2018, down from a 12.5 percent return in fiscal 2017. Dartmouth College also saw a bit of a drop, returning 12.2 percent in fiscal year 2018, and 14.6 percent in fiscal 2017. The University of Pennsylvania’s returns also declined from a year earlier. The endowment returned 12.9 percent in fiscal 2018, compared to 14.3 percent in 2017.
“If you had significant exposure to things like emerging markets, and to a lesser degree fixed income, you got stung,” Schwartz said. He noted that because the endowments have not yet released full reports on their performance in the 12 months months through June, Markov is unable to determine whether certain universities made these specific mistakes.
Performance at Brown University was little changed year-over-year. In fiscal 2017, the endowment returned 13.4 percent, compared to 13.2 percent in fiscal 2018.
Yale University's performance, meanwhile, strengthened, returning 12.3 percent in fiscal 2018 and 11.3 percent in fiscal 2017.
Schwartz said he expects that Ivy League endowments will remain invested in private equity and venture capital despite investors' concerns that these markets may be peaking.
“They are far less likely to make drastic moves in response to market moves [than retail investors],” Schwartz said. “A lot of their investments are tied up. They can’t pull out of private equity, venture capital, or sometimes even hedge funds.”