While endowments for the last fiscal year were able to post an 11.9% investment return, Commonfund President and CEO Verne Sedlacek said yesterday that most funds are “probably still 25% below where they were in 2007.”
At a Wednesday morning press briefing, Commonfund and National Association of College and University Business Officers officials discussed their new joint study, which recorded data from 850 U.S. colleges, universities and affiliated foundations. The 2010 NACUBO-Commonfund Study of Endowments (NCSE) survey’s positive numbers was a sigh of relief for the market, and officials, marking a recovery from 2009’s dismal -18.47% performance.
In his comments, Sedlacek explained that the collective pool of respondents, who combined, surmount to $360 billion in assets, are still climbing back to their pre-crisis levels.
“We’re still not at all out of the woods,” he said, while noting that it could likely take “three or four more years of good markets” to return to their previous asset levels.
A trend that has helped, according to the Wilton, Conn.-based investment firm’s executive, is the commitment to alternatives, which hit the 52% plateau for the endowment participants last year.
“One thing that hasn’t changed is the increasing allocation to alternatives, this is a trend that started 20 years ago,” Sedlacek stated yesterday.
Sedlacek further explained that this has been the status quo due to larger institutions, such as those over $1 billion in assets, and their commitment to private equity, marketable alternative strategies, venture capital, private equity real estate, energy and natural resources and distressed debt.
Also, as a result of this continued alternative attraction, funds have tried to reduce volatility by “owning less equities and increasing the percentage they have in cash,” the former president and chief operating officer of the John W. Henry & Company explained.
Specifically, for the period between July 1, 2009 through June 30, 2010, asset class returns were all positive with the exemption of real estate and its -15.8% return. The highest return came from domestic equities, with a 15.6% posting, fixed-income followed at 12.2%, international equities hit 11.6%, alternatives returned 7.5% and short-term securities/cash/other options were situated at 2.7%.
Also, the Jan. 27 released study listed that the prior “anomalous” results of smaller institutions outperforming larger, and fixed-income and short-term securities topping out equity-based investments returned back to normal in 2010.
“Over the long term, larger institutions with their greater resources generally outperform smaller ones, and domestic and international equities and alternative strategies outperform fixed-income and short-term securities and cash-like assets,” NCSE, NACUBO President and CEO John Walda and Commonfund Institute Executive Director John Griswold said in a joint statement. “We saw these relationships largely restored in the FY2010 Study.”
Previously, in November, preliminary data from about 80 institutions revealed that investment returns approached an average of 12.6%.
From the first round of numbers, the study explained that institution endowments were compared with the performance of the S&P 500 Index, which returned 14.4% for the same period. Additionally, the highest return was situated at 36.2%, and the lowest at 4.8%, the statement explained.
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