The Endowment Index calculated by Nasdaq OMX rose 14.59% in 2021 on a total return basis, easily outperforming a global 60/40 equity/fixed income portfolio, which returned 9.54% during the year. For the fourth quarter, the index increased 4.38%, compared with a 4.06% gain for a 60/40 portfolio.
The index, which ended the year at 1,738.95, was in positive territory for nearly all of 2021, with a closing low of 1,515.07, which occurred on Jan. 4, and a closing high of 1,765.99, which was reached on Nov. 8.
The strong gains for the index were buoyed by rising global equity markets, as the S&P 500 hit 70 record highs throughout the year. Higher inflation from supply chain issues and labor shortages was the primary concern for investors during 2021, said ETF Model Solutions, which is the creator and owner of the Endowment Index.
The index measures the performance for a portfolio that includes global equity, global fixed income, and alternative investments, and it applies an objective, rules-based construction methodology. It is based on allocation data from more than 700 educational institutions that manage a combined $637 billion as of June 30, 2020. Each of the index’s 22 subindexes are investable, and they contain more than 47,000 underlying securities overall. It has a current target allocation of 54% alternatives, 34% equity, 8% fixed income, and 4% liquidity.
Among the index’s 22 components, 10 posted double-digit gains for 2021. The top-performing component of the index by far was oil and gas, which increased 75.59% during the year, followed by commodity dividend futures, which gained 41.87%. Domestic real estate earned 40.38%, while publicly traded master limited partnership (MLPs), private equity/venture capital, and US equity climbed 39.29%, 26.97%, and 25.72%, respectively.
At the opposite end of the asset performance, gold was the worst performer for the index, losing 3.99% for the year, followed by emerging market fixed income and international developed fixed income, which declined 2.45% and 2.20%, respectively. Emerging market equity – China was down 2.17% for the year, while domestic fixed income and emerging markets lost 1.66% and 0.64%, respectively.
Despite the robust returns, the Endowment Index’s returns were just a little more than half of the median 27% return from endowments, according to Wilshire Trust Universe Comparison Service data. And several endowments easily surpassed this, including Washington University in St. Louis (65%), Duke University (55.9%), the University of Virginia (49%), Boston College (46%), Boston University (40%), the University of Kansas (37.1%), the University of Nebraska (32.3%), and Clemson University (31.3%).
Endowment Index Asset Class Performance
Asset Class | 2021 Change (%) | Asset Class | 2021 Change (%) | |
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Commodity – Oil & Gas | 75.59 | Managed Futures | 8.99 |
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Commodity/Div-Futures | 41.87 | Intl. Real Estate | 5.64 |
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Domestic Real Estate | 40.38 | Private Eq-Distressed Debt | 2.02 |
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Publicly Traded MLPs | 39.29 | Liquidity – TBills | -0.10 |
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Private Equity/VC | 26.97 | Hedge Funds | -0.44 |
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US Equity | 25.72 | Emerging Markets | -0.64 |
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Commodity – Met/Mining | 22.35 | Domestic Fixed Inc. | -1.66 |
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Global Equities | 18.24 | Em. Market Equity – China | -2.17 |
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Commodity – Timber | 12.30 | Intl Developed Fixed Inc | -2.20 |
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Intl Developed Equity | 11.29 | Emerging Mkt Fixed Inc | -2.45 |
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Commodity – Infrastructure | 9.71 | Gold | -3.99 |
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Tags: 60-40 portfolio, Commodities, Endowment Index, gold, Nasdaq OMX, oil & gas, S&P 500