Endowment Index Tumbles over 20% in First Quarter

Last year, the Endowment Index calculated by Nasdaq OMX had its best year in a decade as it climbed 20.19%. Then the COVID-19 pandemic arrived, the stock markets tumbled and all those gains were wiped out in just the first three months of this year.

The index fell 20.24% for the first quarter of 2020, while its benchmark portfolio of 60% stocks and 40% bonds declined 12.88% during the same period. The sharp decline was attributed to an unprecedented halt in economic activity brought on by the pandemic, which gut punched the global financial markets and ended the longest economic expansion in US history. The index was hit particularly hard between Feb. 21 and March 23, when it plunged 29% to 982.82 from 1,383.69.

The index’s top-performing component for the quarter was gold, which increased 5.60%. The other components with gains during the quarter were domestic fixed income, which rose 3.33%, followed by cash and international developed fixed income, which edged 0.42% and 0.17% higher, respectively. The other index components all suffered losses.

The index applies an objective, rules based construction methodology based on portfolio allocation data obtained from more than 770 educational institutions that collectively manage over $630 billion, as of June 30. The index is comprised of 24 sub-indexes, which have more than 44,000 underlying securities.

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As part of its annual review, the index was reconstituted and rebalanced in early February. The allocations between equities, fixed income, and alternatives changed slightly with the allocations toward equities and fixed income declining 1% each and the allocation to alternatives increasing 2%. Five new holdings were added with some minor changes to several asset classes.

The index represents the investable opportunity for managers of portfolios using ETF Model Solutions’ Endowment Investment Philosophy or who otherwise incorporate alternative investments within a comprehensive asset allocation. It is intended to provide an objective tool used for portfolio comparison, investment analysis, and research and benchmarking.