Firms & Funds

PE, VC slide as returns for endowments crater to -1.9 pct

-
private equity, venture capital, higher education, endowments, pension funds
Aug 15, 2015; Chicago, IL, USA; Chicago Cubs shortstop Addison Russell (22) slides safely under the tag of Chicago White Sox catcher Tyler Flowers (21) to score a run during the fifth inning at U.S Cellular Field. Mandatory Credit: Dennis Wierzbicki-USA TODAY Sports - RTX1OE4T
  • Institutions lower return expectations: Commonfund
  • Average endowment returns fall into negative territory
  • PE nets 4.5 pct, compared with more than 9 pct in FY 2015

Private equity returns for college endowments fell by more than half year-over-year, according to the 2016 NACUBO-Commonfund Study of Endowments.

College and university PE portfolios returned an average of just 4.5 percent in the fiscal 2016, ended June 30, down from the 9.3 percent they returned in the year earlier, according to the report.

PE returns varied depending on the size of the foundation or endowment. Those with more than $1 billion of total assets generated a 6.3 percent return from their private equity portfolios. Endowments with $25 million to $50 million of assets generated a 7.8 percent return.

Venture capital portfolios also had a down year, netting an average of 1.5 percent compared with 15.1 percent the year before, according to the report.

Those returns, though less than what PE and VC generated in FY 2015, still exceeded overall returns in an otherwise weak year for college and university endowments. The average endowment’s portfolio netted a negative 1.9 percent return in FY 2016, down from the 2.4 percent average the previous year.

“Institutions are responding to these lower investment results by adjusting their average return expectations, which had become unrealistically high,” said Commonfund Institute Executive Director William Jarvis in a statement.

NACUBO, formally the National Association of College and University Business Officers, publishes a new version of the report with Commonfund each year. The study includes data from 805 U.S. college and university endowments representing more than $515 billion of assets.

Action Item: For more information about the NACUBO-Commonfund study, visit www.nacubo.org