In the Ivy League, for example, just one university, Dartmouth College, beat the S&P in fiscal 2012. Dartmouth’s endowment earned 5.8 percent for the year, while Harvard University’s endowment, the world’s largest with $30.7 billion in assets, lost 0.05 percent.
The preliminary study, which tallied returns from 463 endowments, was put together by the National Association of College and University Business Officers (Nacubo) and Commonfund, an investment firm that manages more than $24 billion in assets from non-profit institutions. The final study, which is expected to have contributions from about 800 institutions, will be released in January.
One trend that has continued over the last few years is that larger endowments performed better than smaller ones, and in 2012, endowments with more than $1 billion in assets actually netted a positive 1.2 percent return on average. Data for 2012 “confirm the historic pattern of outperformance by larger institutions, chiefly those with assets in excess of $1 billion,” said John Walda, Nacubo’s chief executive and John Griswold, a Commonfund executive director in a prepared statement. The worst performing group, those endowments with assets between $51 million and $100 million lost 1 percent on average in 2012.
The study also reported that long term endowment returns averaged 6.1 percent over the last decade.
The biggest endowments tended to be much more heavily exposed to alternative assets. Endowments with more than $1 billion in assets, for example, had 59 percent of their assets in alternatives such as private equity during 2012. That compared to an average 14 percent allocation to alternatives for endowments with assets of less than $25 million.
Some universities blamed their overall poor performance on global stock markets, which performed much worse than the U.S.-focused S&P 500. The MSCI World Index, for instance, fell 14 percent in fiscal 2012. Jane Mendillo, Harvard’s endowment chief, was among those who blamed sagging global markets for their tepid performance. “This is a time of unusual turbulence with significant macroeconomic issues facing regions around the world,” she wrote in a September statement to Harvard trustees.
But at many institutions private equity didn’t earn enough to rescue endowments from poorly performing overseas stocks. Harvard, for instance, earned just 2 percent on its private equity and venture capital portfolio. Yale University, however, earned more than 13 percent from its private equity program during 2012. Yale’s endowment gained 4.7 percent overall.
While Nacubo-Commonfund study didn’t cite the performances of individual endowments, it did report that the year’s best performing endowment earned 15.8 percent, while the worst performing endowment among the 463 surveyed lost 9.5 percent for the year.