Report Shows Small University Endowments Outperform

Preliminary data from 80 colleges and universities gathered for the NACUBO-Commonfund Study of Endowments to be released in January shows that broad gains in the stock market last year helped college asset pools earn their first positive investment return in three years, with the smallest endowments performing better than the largest ones.

(November 3, 2010) — College endowments have returned an average of 12.6% in fiscal 2010 with the smallest university funds outperforming their larger counterparts, according to a joint NACUBO-Commonfund Institute report.

The findings from the NACUBO-Commonfund Study of Endowments have revealed that institutions with less than $25 million in assets — generally more heavily invested in traditional assets, such as domestic equities and fixed-income — returned an average 14.1%, compared to the 12.3% average return for those with more than $1 billion in assets for the fiscal year, which ended June 30.

According to the report, endowments with assets from $101 million to $500 million returned an average 13.8%, while endowments with $25 million to $50 million returned 11.3%. Overall, endowments returned an average 12.6% for the year ended June 30, an increase from the average -18.7% return a year earlier. Meanwhile, three-year returns averaged -3.4%; five-year returns, 2.7%; and 10-year returns, 3.2%; the returns are annualized and for periods ended June 30.

Despite the rebound, endowments on average failed to beat the stock market. The Standard & Poor’s 500 Index rose 14.4% in the same 12-month period, ended June 30, outperforming university invest funds, which generally hold a mix of stocks, bonds, hedge funds, real estate, and more complex investments. Many funds do not appear to have erased the losses they suffered during the recession.

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While the 80 schools in the preliminary round of the endowment study had returns ranging from 4.8% to 36.2%, the full study, to be released in January, will include more than 800 institutions.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

China SWF Pushes Obama to Invest in Infrastructure; Lou Jiwei Warns of Slowing Economic Growth

China's sovereign wealth fund -- the China Investment Corporation (CIC) -- has urged the US to invest in infrastructure to boost American competitiveness and create jobs; Lou Jiwei, chairman of the CIC, warns that China's economic growth may face a slowdown as its population ages.

(November 3, 2010) — China’s sovereign wealth fund, which manages an estimated $300 billion in both domestic and overseas investments, has pushed the Obama administration to spend $1 trillion on infrastructure over the next five years.

Zhou Yuan, head of asset allocation at the China Investment Corporation (CIC), told the BBC that Beijing would be willing to invest in such projects to help create jobs and boost America’s competitiveness.

At a conference of the Chinese Financial Association in New York, Yuan said that the Beijing-based CIC is urging the US government to begin a program to invest in US infrastructure in the form of a public and private equity partnership. Under the CIC’s recommendations, the US should refocus its attention on creating super high-voltage transmission lines and improving high-speed links to better connect US cities, which would lead to 500,000 high-paying manufacturing jobs, the BBC reported.

When asked by BBC News whether CIC would invest directly, Zhou said: “If the conditions are right, and if, on a risk return basis, we believe this is a good investment, then yes…But of course we want to emphasize the fact that we are going to be a passive investor,” Yuan stated. We’re not here to run anything or to own anything.”

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In related news, the head of the CIC, Lou Jiwei, has cautioned about a significant dip in Chinese growth within the next four years as a result of a retiring elderly. At a forum in Beijing this week, according to prepared remarks obtained by Bloomberg News, Jiwei explained that China’s start of the one-child policy implemented 30 years ago and longer life spans are expected to put a severe damper on the number of working adults able to support each retired citizen. Consequently, China’s economic growth rates may slow at an earlier stage compared to Japan and South Korea.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742