UCSD Foundation Repeats as Best-Performing University Endowment in Fiscal 2024

Smaller, equity-heavy funds outpaced larger endowments with higher private market allocations during a boom year for artificial intelligence and tech stocks, per NEPC.

In fiscal 2024, university endowments followed a similar trend as the prior year: Endowments with a higher allocation to equites were top performers, while endowments with higher allocations to private markets often saw single-digit returns.

Large-cap tech stocks drove returns in fiscal 2024, due to the artificial intelligence boom and overall strength of the “Magnificent Seven.” At the same time, returns for private equity and venture capital, both hallmarks of large elite endowments, were sluggish.

Among “mega-endowments” with more than $1 billion in assets, the UC San Diego Foundation ($1.6 billion assets under management) took the top spot with a 15.5% return, according to a review of endowment performance in fiscal year 2024 by investment consultant NEPC. This is the second year in a row the equity-heavy UCSD Foundation—which administers the funds of the University of California, San Diego—was the top performer.

The median endowment, out of 78 endowments NEPC tracked, returned 11.9% in the fiscal year.

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“The [UC San Diego Foundation’s] success stems from a unique approach to endowment management that is a particularly good fit for current market trends,” Colin Hatton, an NEPC principal for endowments and foundations, wrote in the NEPC report. “They utilize several University of California General Endowment Pool accounts, enhancing them with their own strategic position which consists primarily of U.S. large-cap equity. It’s a hybrid approach that allows them to benefit from the University of California Investment Office’s resources while employing an asset allocation that meets their own needs.”

The UCSD Foundation allocates approximately 64.8% of its total endowment pool to public equities, as of June 30, 2024, according to the fund’s investment reports. NEPC noted that UCSD’s equity-heavy portfolio drove 90% of the fund’s gains.

Top Performers

Source: NEPC

Many of the top-performing funds on NEPC’s list also had large equity allocations. The endowment of Michigan State University ($4.4 billion AUM) came in second with a 15.1% return; it also has significant alts investments. That fund allocated 39% of its portfolio to equities, 31% to private equity and 22% to hedge funds.

At No. 3, the University of Wisconsin Foundation ($4.3 billion AUM) boasted a 14.7% return, with nearly half of its portfolio in equities.

According to NEPC, large-cap U.S. equities returned 24.6% in fiscal year 2024, the trailing 12-month period which typically ends June 30 for most endowments. During the period, global equities returned 19.4%, while emerging markets and non-U.S. developed equities returned 12.5% and 11.5%, respectively.

Credit returned 10.4% in the fiscal year, while small-cap U.S. equities returned 10.1%. Hedge funds and private equity returned 5.0% and 4.3%, respectively. U.S. core bonds returned 2.6%, and venture capital returned negative 1.1%. The worst-performing asset class during the fiscal year was real estate, with a negative 10% return.

Lowest Returns

The endowments with the lowest returns for fiscal 2024, as tracked by NEPC, include the endowments of Princeton University ($34.1 billion) with a 3.9% return, Yale University ($41.4 billion AUM) with a 5.7% return and Carnegie Mellon University ($3.2 billion) with a 6.6% return.

While it was not a strong year for private assets in endowment portfolios, elite universities which abide by the “Yale Model,” which sees high allocations to private assets, as pioneered by the late Dave Swensen, boast strong long-term returns. These private assets have generally outperformed equities over longer periods of time, and these funds typically have access to the best managers, too.

“We also believe that private equity and venture capital aren’t likely to remain underperforming sectors for an extended period of time,” the NEPC report noted. “Both segments needed to endure a period of repricing in an environment of higher interest rates, but we think that cycle will come to an end now that interest rates are expected to remain stable or come down.”

Many endowments are still reeling from poor returns in fiscal 2022, which followed a strong fiscal 2021. According to the National Association of College and University Business Officers, endowments returned negative 8.0% in 2022, while they gained an exceptional 30.6% in 2021. Many endowments saw their assets peak that year.

Research and analytics firm Markov Processes International noted last December that, for the first time, its “Ivy League” grouping of endowments, which includes non-Ivy schools Stanford and the Massachusetts Institute of Technology, underperformed both a 70/30 portfolio and the average endowment for the second year in a row. Still, over the past 20 years, annualized, these endowments returned an average 9.2%, while a 70/30 portfolio returned 6.8%.