NACUBO: Endowments Returned 12.2% | Chief Investment Officer

Of 809 institutions studied, endowments showed much higher rates of return for the 2017 fiscal year, averaging 12.2%, up from -1.9% in fiscal 2016, and 2.4% from fiscal 2015, according to the 2017 NACUBO-Commonfund Study of Endowments.

“This obviously reflects continued strength in public equity markets. US equity markets have been positive for each of the last nine calendar years, and this year, we saw really complementary strength in global markets as well, [especially] EMEA and emerging markets,” said Catherine Keating, president and CEO, Commonfund.

Five primary investment categories were tracked in the study, with only fixed income, at 2.4%, showing a lower return in FY2017 than FY2016’s 3.6%. Non-US equities, which produced last year’s lowest return in the post-Brexit environment at -7.8%, generated this year’s highest return, at 20.2%, followed by US equities, which returned 17.6% compared to last year’s -0.2%. Alternative strategies turned in a 7.8 % return versus -1.4 % in FY2016, while short-term securities/cash/other returned 1.4 % compared with last year’s 0.2 %.

Of alternative investment strategies, private equity, defined as LBOs, mezzanine, M&A funds and non-US private equity, provided the highest return, at 11.7%, followed by distressed debt and venture capital, which generated returns of 8.9%. and 8.4%, respectively.

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But endowments’ 10-year average annual returns dipped to 4.6% from 5% in 2016, far below the common endowment target rate of 7% to 8%. One factor causing the dip: the 10-year average no longer includes the 17.2% return rate from 2007.

The lower rate “reflects the continued impact of the financial crisis in 2008 and 2009 on endowment returns,” said Keating, “and it also reflects, interestingly enough, a fair amount of volatility in the last decade. The decade had five years of double-digit returns, and four years where returns were either negative or flat.

But if the 2008/2009 post-crash rates weren’t factored in, five of those eight years had positive double-digit returns, “so, there’s no doubt that the recovery from the financial crisis has been strong and positive,” said Keith Luke,

The study included 809 institutions representing $566.8 billion in endowment assets. The average US endowment was $700.7 million, and the median endowment was approximately $127.8 million. 44% of study participants had endowments that were $100 million or less.

Tags: 2017 NACUBO-Commonfund Study of Endowments, Aquity, Endowments, NACUBO, Private Equity

John P. McCormick.

John P. McCormick will succeed J. Tomilson Hill as president and chief executive of Blackstone Alternative Asset Management (BAAM.) Hill will step back from the day-to-day operations and transition to a new role as chairman of BAAM, maintaining strong investor relationships and providing strategic advice to the senior management team. He will also remain active in minority interest investments in hedge funds.

Stephen A. Schwarzman, Blackstone’s chairman, chief executive and co-founder, said: “During Tom’s 25 years at Blackstone, he took our hedge fund solutions business from being a less than $1 billion business when he assumed responsibility in 2000, and built it into the world’s largest discretionary investor in hedge funds with more than $75 billion in assets under management today. I personally thank him for the many years of leadership and support he has provided BAAM and our firm more broadly.” As a firm, Blackstone currently has $385 billion in assets under management in alternative investment strategies.

During his 40-year career, Hill was president and chief executive of BAAM since 2000, and became the firm’s vice chairman in 2007.

J. Tomilson Hill.

Hill said: “I’m incredibly proud of the success of Blackstone and BAAM, and immensely proud of our team. I am thrilled that John McCormick will transition to the president and CEO role. He is one of our long-time, stand-out leaders and has been an integral part of the success of BAAM.”

McCormick, 50, has been with BAAM since 2005, most recently as senior managing director and head of global business strategy for the hedge fund solutions group. He has overall responsibility for global marketing and client services functions in addition to overseeing its Liquid Alternatives, GP Stakes, and hedge fund seeding businesses.

On the appointment of McCormick, Schwarzman said: “In his 13 years at Blackstone, he has played an integral role in determining the strategy of our hedge fund business and helped to spearhead multiple new business initiatives. Transitions like these speak to the depth of talent across the firm and the way the firm plans for the future.”

McCormick said: “It is a privilege to be appointed to lead BAAM. This opportunity is extremely exciting for me, and I look forward to working with Blackstone’s senior management and BAAM’s talented team to continue building on Tom’s substantial legacy.”

McCormick’s 25-year career includes senior level strategy roles at McKinsey & Co., time as an attorney with Davis Polk & Wardwell, and serving the US Department of the Treasury. He received a Bachelor of Arts from Vassar College and a JD from Yale Law School.

Tags: Blackstone Alternative Asset Management, Hedge Fund, J. Tomilson Hill, John P. McCormick