Amherst Endowment Posts 5.4% Annual Return on Private Equity

  • Value of college's endowment rose about 2.4% to $2.2 billion
  • Emerging market investments were fund's underperformer

Amherst College, one of the wealthiest U.S. liberal arts schools, posted a 5.4 percent gain in its endowment for the year ended June 30, boosted in part by investments in private equity.

The value of the fund was $2.2 billion, up about 2.4 percent from the previous year, said Caroline Hanna, a spokeswoman for the Amherst, Massachusetts-based school. Its 10-year annualized return was 9 percent, according to Bloomberg calculations.

Amherst uses its fund for more than 50 percent of its annual operating budget, one of the highest in U.S higher education, up from 40 percent in fiscal 2009. Endowment investment losses during the financial crisis -- the average decline was almost 20 percent -- served as a reminder that some of the wealthiest schools rely on their endowments to run. The largest institutions, those with assets over $1 billion, looked to their endowments to fund 17 percent of their operating budgets in 2014, according to the National Association of College and University Business Officers.

The school is heavily dependent on the endowment in order to “make financial circumstances [of students] irrelevant,” Carolyn “Biddy” Martin, the school’s president, said in an interview Monday at Bloomberg News headquarters in New York.

As the endowment has grown 86 percent between 2005 and 2014, its student financial aid budget has increased by 135 percent, Martin said. About 60 percent of Amherst students receive aid based on a family’s need.

U.S. Equities

U.S. equities and private equity were among the better-performing investments while global equities, emerging markets and absolute return, which can include hedge funds, weren’t as strong, according to the school.

The college has increased its exposure since 2011 to absolute return to 23 percent from 12 percent of the portfolio, according to its most recent annual report in June 2014. It also increased investments in public and private equities, which comprise more than half of its holdings.

The median return for endowments and foundations with more than $500 million this year is 3.6 percent, according to an estimate by Wilshire Trust Universe Comparison Service.

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