University of Missouri Adjusts Endowment, Pension Asset Allocation

The University of Missouri System revised the asset allocation for its $3.2 billion defined benefit pension plan, and its $1.37 billion endowment at its most recent board meeting held on Sept. 28 and 29. The asset allocation overhaul targeted a reduction in risk with the expectation that investment returns will be lower going forward, according to internal documents.

“In addition to noticeable improvements in portfolio efficiency, the changes also bring more balance to each of the portfolios, primarily in terms of increased protection in rising inflation and falling growth economic environments,” noted board materials. The board expects the new target allocations to offer a 0.4% increase in mean expected returns, given the reduction in portfolio risk coupled with current capital market return expectations.

The changes included lower allocations to global equities, global fixed income, hedge funds emerging markets and opportunistic debt. Conversely, the board plans to increase commitments to commodities, sovereign and inflation-linked bonds. Specific asset allocations changes are as follows:

Frothy valuation within the domestic public equities will drive the fund’s slight overweight in non-U.S. public equities. Allocations to opportunistic debt and emerging markets debt were eliminated due to the credit risk associated with such investments. “Based on our view that we are in the late stages of economic expansion,” noted the board, “we believe it would be prudent to significantly reduce our exposure to credit risk.”

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Tags: Asset Allocation, Endowments, Pension, University of Missouri

Brown University’s $3.5 billion endowment reported a 13.4% return on investments for the fiscal year ended June 30, which it attributed to a strong performance from global stock markets.

During the University’s fiscal year 2017, which closed June 30, the endowment distributed $179 million to Brown’s operating budget, representing approximately $19,000 per student, and 18% of its budget.

The endowment’s performance surpassed the 11.1% preliminary return of its benchmark portfolio, as well as Cambridge Associates’ preliminary mean and median 12.9% returns for colleges and universities. Since 2012, the endowment’s assets have grown to $3.5 billion from $2.6 billion, and have contributed more than $800 million to Brown’s operating budget. The returns also represented a strong rebound from the previous year when the endowment reported a loss of 1.1%. The annualized returns for Brown’s endowment for three, five, 10, and 20 years are 5.8%, 9.1%, 5.2%, and 8.6%, respectively.

“Contributions from the endowment are vital in advancing Brown’s strategic priorities,” said Barbara Chernow, executive vice president for finance and administration, in a statement. “Prudent management with a focus on preserving the endowment’s long-term strength ensures that Brown can continue to offer future students the same opportunities for learning, research and discovery that students enjoy today.”

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Chernow added that Brown’s investment office manages the endowment with a dual mandate to protect and grow its value over the long term. She said the endowment is invested in a diverse set of asset classes and conservatively positioned to allow for multiple future macroeconomic scenarios.

Tags: Brown University, Endowments, Fiscal Year

University of Missouri Adjusts Endowment, Pension Asset Allocation

Brown University Endowment Returns 13.4%

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