Weak performance in alternative investments in fiscal 2023 is dragging down the performance of university endowments that are reporting lower-than-average overall returns despite strong equity returns.
Among Ivy League universities, Brown University, Columbia University, Dartmouth College and the University of Pennsylvania all released returns recently for the 2023 fiscal year that ended June 30, with each posting a positive return.
Yale University earlier reported a 1.8% return for fiscal 2023, underperforming its benchmark, while Cornell University, Harvard University and Princeton University have yet to report their endowment returns.
Columbia
Columbia’s endowment shined, with a return of 4.7% that outperformed such notable peers as MIT, Yale and Stanford University, which returned -2.9%, 1.8% and 4.4%, respectively.
“The Columbia investment portfolio benefitted from strong public markets performance in the United States in fiscal 2023 and was also bolstered by hedge fund outperformance relative to benchmarks,” said Kim Lew, president and CEO of the Columbia Investment Management Co., in a press release.
“While our private assets portfolio was modestly negative in aggregate this past year, we believe that private markets continue to offer investment opportunities at favorable valuations in segments that will outperform over the next market cycle,” Lew continued.
In fiscal 2022, the Columbia endowment returned -7.6% on the assets in its portfolio. The value of the endowment’s assets grew to $13.8 billion in fiscal 2023 from $13.3 billion in fiscal 2022.
Columbia’s endowment results are in line with a study from Markov Process International’s Transparency Lab, which estimated endowment returns for fiscal 2023. MPI estimated Columbia to return 7.9%, and while the actual numbers were not as high, MPI projected Columbia to be among the highest performing endowments this fiscal year.
Brown
Brown University also released its endowment results on October 18. Brown’s endowment returned 2.7% in fiscal 2023, rebounding from a negative 4.6% return in fiscal 2022, according to the university.
Like many other endowments, equity returns were strong, but the total fund was dragged down by lower returns in alternatives. Brown’s endowment returns for the prior three, five, 10 and 20 years were 14.1%, 13.3%, 11.3% and 9.8%, respectively.
The value of Brown’s endowment assets increased to $6.6 billion from $6.5 billion year-over-year. While Brown has the smallest endowment in the Ivy League, it is growing: According to the university, the value of the endowment’s assets has grown by 50% since fiscal 2021.
“Our mandate is to produce investment returns such that each and every endowed gift can continue to make contributions to its stated purpose in perpetuity and such that contributions do not lose economic value over time to the pressures of inflation,” said Jane Dietze, vice president and CIO of Brown’s investment office. “Fortunately, our investment gains have been sufficient to increase the value of Brown’s endowed funds significantly, and those funds are playing a direct role in bringing world-class student support, teaching initiatives and high-impact research to life on campus every day.”
Dartmouth
Dartmouth’s endowment returned a meager 1.6% in fiscal 2023, up from -3.1% in fiscal 2022. While the results were not as strong as some peers, the college has a history of strong performance over the long term. Dartmouth’s endowment returned 10.8%, 10.7% and 10% over the past five, 10 and 20 years.
“The superior performance of Dartmouth’s endowment over an extended time period makes possible institutional investments in innovation and our academic mission that result in greater impact,” said Dartmouth President Sian Leah Beilock in a statement.
Dartmouth’s endowment value declined to $7.9 billion as of June 30 from $8.1 billion at the end of fiscal 2022.
Penn
The Penn Office of Investments also released its endowment return for fiscal 2023: The endowment returned 1.3%, underperforming its composite benchmark of 2.2%. In fiscal 2022, Penn had been the largest endowment in the country to produce a positive return, at 0.9%.
Penn’s weak returns could be attributed to the fund’s high allocation of assets to private equity and other alternative asset classes, an all-too-common trend among university endowments this fiscal year. The fair value of the endowment’s private equity allocation declined to $7.85 billion this fiscal year from $7.9 billion in fiscal 2022.
The Penn endowment’s three-, five-, 10- and 20-year annual returns were 12.7%, 9.5%, 9.7% and 8.8%, respectively. The endowment outperformed its benchmark for these spans. The value of Penn’s endowment grew to $21 billion in fiscal 2023 from $20.7 billion last year.
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Tags: Brown University, Columbia Investment Management Company, Dartmouth College, Endowment, Jane Dietze, Kim Lew, Markov Process International, Markov Process International Transparency Lab, Sian Leah Beilock, University of Pennsylvania