- At least 11 large endowments have posted fiscal 2016 losses
- The $755 million fund was helped by private investments
The mid-sized University of Oregon endowment beat the performance of some of the bigger funds in fiscal 2016, thanks in part to investments in private equity and real estate.
The $755 million endowment said it earned 2.5 percent in the year through June 30, the largest investment gain by U.S. college endowments reporting so far. At least 11 U.S. universities with assets of more than $1 billion had declines for the fiscal year. The Massachusetts Institute of Technology bucked the trend, posting a 0.8 percent gain on its $13.2 billion endowment.
Timing played as large of a role as its investment choices in Oregon’s performance, Jay Namyet, chief investment officer of the foundation that manages the endowment, said in an interview.
“Every once and a while a blind squirrel catches an acorn, and that’s what it feels like happened here,” Namyet said. Oregon’s gains came from “dollars that were planted in the ground years and years ago” in venture capital, direct lending and growth funds, he said.
Oregon’s performance was driven by its non-marketable securities, specifically in private capital and and real assets, which accounts for about 20 percent of the portfolio, he said.
The Eugene, Oregon-based foundation was underweight in oil and gas, which protected it against the tumble in energy prices, Namyet said. The endowment’s global equity investments and its hedge fund holdings were flat for the year, with less than a half percent loss each, Namyet said.
Endowments of all sizes were down a median 0.74 percent in fiscal 2016 while funds with more than $500 million lost a median 0.73 percent, according to the Wilshire Trust Universe Comparison Service. The Wilshire data, from fund custodians, excludes fees while most schools report returns net of fees. The fiscal year is shaping up to be the worst year for school funds since 2009, when the richest schools had a median loss of 21.8 percent, according to Wilshire.
In fiscal 2015, Oregon beat a benchmark return as well, reporting a 7.4 percent investment gain against the 2.4 percent average, as calculated by the National Association of College and University Business Officers.
The foundation’s asset allocation in fiscal 2016 was unchanged from the prior year, with 40 percent in global equity, 25 percent in diversification strategies that include absolute return funds and 20 percent in private equity, 15 percent in inflation protection, according to Namyet.
Namyet said he’s concerned about his fund’s ability to outperform in fiscal 2017 and plans to take more defensive positions.
“With very low yields in the credit space, what I think are pricey equities, and everyone knowing that the central banks are the major influencers, I worry that the risks are only to the downside,” Namyet said.