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June 30, 2009

Steering Clear of Hedge Funds, Small Universities' Endowments Are Losing Less

Small universities’ endowments did significantly better in the just-ended fiscal year than their larger, higher-profile peers, which plunged more deeply into alternative investments such as hedge funds, The Wall Street Journal reports.

The five largest single-university endowments — Harvard, Yale, Stanford, Princeton, and the Massachusetts Institute of Technology — expect to finish the year with 25- to 30-percent losses. The median decline in the first 11 months of fiscal 2009 was 20 percent, and endowments with less than $100-million in assets lost 16 percent, on average.

“A lesson from this crisis is that following what the larger guys have done is not necessarily a road map to success,” said Daniel Jick, head of HighVista Strategies, in Boston, which manages endowment money for small academic institutions.

To learn more about how all types of nonprofit endowments are faring, see the Chronicle’s annual endowment study.

Tuesday June 30, 2009 | Permalink

Comments

1. Generally speaking, smaller endowments need to stay more liquid to more easily meet their budgetary funding requirements. Hence, their greater reliance on fixed income and equities, statistically speaking. Also, smaller endowments generally cannot avail themselves of the top tier alternative asset managers due to policy-driven allocation parameters conflicting with manager minimums. Ironically, this issue has proven to be a blessing of sorts for these institutions. Endowments with under $500 million barely underperformed those with more than $1 billion in the eleven months ended May 2009.

   — Lee Boveroux    Jul 6, 12:33 PM    #

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