Large Endowments Outperform
Average Investment Pool Compounded Nominal Rates of Return for Fiscal Years Ending June 30, 2007 for 1, 3, 5, and 10 Years
Investment Pool Assets |
1 yr % |
3 yr % |
5 yr % |
10 yr % |
Greater than $1 Billion |
21.3 |
16.4 |
13.9 |
11.1 |
$501 Million to $1 Billion |
19.3 |
14.2 |
12.3 |
9.5 |
$101 Million to $500 Million |
18.0 |
13.1 |
11.5 |
8.5 |
$51 Million to $100 Million |
16.7 |
11.9 |
10.8 |
7.9 |
$26 Million to $50 Million |
15.9 |
10.7 |
9.8 |
7.3 |
Less than or equal to $25 Million |
14.1 |
9.7 |
8.8 |
6.7 |
S&P 500 |
20.6 |
11.7 |
10.7 |
7.1 |
Lehman Brothers Aggregate Bond Index |
6.1 |
4.0 |
4.5 |
6.0 |
Source: NACUBO Average Investment Pool Compounded Nominal Rates of Return for FY 2007
If we just strip out Harvard & Yale, two of the most successful endowments, they have handily trounced the market over a 1 year and 10 year period.
Returns for Fiscal Year Ending June 30, 2007 and 10 Years
|
1 yr % |
10 yr % |
Yale Endowment |
28% |
17.8% |
Harvard Endowment |
23% |
15% |
S&P 500 |
20.6% |
7.1% |
Source: 2007 Yale Endowment Report and Harvard University Gazette
Large endowments have four key differences from small endowments:
- Large endowments average 20.5% in hedge funds, the smallest endowments average 2.9%
- Large Endowments average 11.2% in fixed income (bonds), the smallest endowments average 27.5%.
- Large Endowments average 7.1% in private equity and 3.3% in venture capital, the smallest endowments have virtually no exposure to those asset classes.
Average Asset Class Allocations
Investment Pool Assets |
Equity % |
Fixed Income % |
Real Estate % |
Cash % |
Hedge Funds % |
Private Equity % |
Venture Capital % |
Natural Resources % |
Other % |
Greater than $1 Billion |
47 |
11.2 |
5 |
1.6 |
20.5 |
7.1 |
3.3 |
3.6 |
.6 |
$501 Million to $1 Billion |
50.5 |
13.3 |
5.3 |
2.3 |
17.7 |
5.6 |
2.1 |
2.4 |
.8 |
$101 Million to $500 Million |
56.6 |
15.1 |
3.6 |
2.8 |
13.8 |
2.8 |
1.1 |
2.1 |
2 |
$51 Million to $100 Million |
60.1 |
19.2 |
3.6 |
3.8 |
8.7 |
1.2 |
.4 |
1.3 |
1.8 |
$26 Million to $50 Million |
63.2 |
21.3 |
3.1 |
3.1 |
6.9 |
.5 |
.1 |
.8 |
1 |
Less than or equal to $25 Million |
59.5 |
27.5 |
1.8 |
6.4 |
2.9 |
.4 |
.2 |
.3 |
.9 |
Source: 2007 NACUBO Endowment Study
The main reason large endowments outperform is their investments in hedge funds and private equity.
