Private equity investments up 11.3 percent for endowments of U.S. colleges, universities

  • Preliminary 2013 NACUBO-Commonfund Study of Endowments surveyed 461
  • Combined fiscal 2013 return rises to 11.7 percent, from 0.3 percent loss in 2012
  • U.S. equities rise 20.5 percent as best-performing major asset class

Across all asset classes, endowments returned an average of 11.7 percent, net of fees, for the fiscal year ended June 30, compared with a negative return of 0.3 percent in 2012, according to preliminary results of 461 institutions compiled by the 2013 NACUBO-Commonfund Study of Endowments.

Domestic equities outshone five major asset classes with a 20.5 percent return, followed by 14.4 percent for international equities, a collective 8.6 percent return for alternative strategies, a 2.4 percent return for fixed income and a 1.0 percent return for short-term securities, such as cash.

Among alternative investments, distressed debt turned in the most robust returns of the group at 13.2 percent, followed by 11.3 percent for private equity, including LBOs, mezzanine and M&A funds and international private equity.

Marketable alternatives — hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives — took the No. 3 slot with a gain of 10.0 percent, followed by a 9.0 percent return for private equity real estate, and 6.1 percent for energy and natural resources.

Venture capital ranked sixth with a return of 5.9 percent. Commodities and managed futures fell 6.0 percent as the year’s only investment strategy with a negative return.

Allocations move toward equities

Reversing a trend of more institutional money going into alternatives, the average allocation fell to 47 percent of participating endowments’ portfolios from 54 percent in 2012.

Average allocation to domestic equities increased to 20 percent from 15 percent, and the allocation to international equities moved up to 19 percent from 16 percent.

“Colleges and universities may be shifting some assets into more-liquid strategies, but because domestic and international equities were the two best performing asset classes in FY2013, some of the shift may have been the result of market action,” NACUBO President and Chief Executive Officer John Walda and Commonfund Institute Executive Director John Griswold said in a joint statement.

Final results of the 2013 survey are expected early in 2014.