Federal funding cuts could impose significant financial strain on elite universities. One key factor in determining a university’s resilience to such funding disruptions is the liquidity of its endowment.
Columbia
With Mag 7 stocks trouncing VC and Private Markets trailing in FY2024, Columbia and Brown lead Ivy endowments but with vastly different risk and exposures
Ivy and elite endowments did poorly in fiscal year 2023, especially relative to a global 70/30 benchmark and smaller, less resourced endowments that invest in less private markets assets/funds than those employing the ‘Yale model’.
Endowments and pensions continue to post gains, but exposure to private markets pushes many below benchmarks
About eight years ago, Columbia University’s endowment had a 10-year return that was one of the best in class, together with MIT and Yale.
Most endowments have been propped up by a similar concentration in private assets. The ones that suffered the worst, however, couldn’t have been more different in their approach.
We take a quick look at Ivy schools’ endowments’ performance results both for the 2020 fiscal year and also long-term for 10-year periods.
The grades for all the Ivy League endowments are in – and they are rather disappointing. Save for Brown, all Ivies underperformed the 9.9% return of a domestic 60-40 portfolio in fiscal year 2019. The Ivy average in FY 2019 was 6.7%, significantly underperforming the 60-40 and reversing two years in which they outperformed the traditional domestic benchmark.
Returns across the Ivy League are largely seen as being driven by exposure to private equity and venture capital.
In stark contrast to FY 2016, this past year was a strong one for most endowments. In fact, nearly all the Ivy League endowments, Harvard being the only exception, beat the 60-40 portfolio, a commonly cited benchmark that endowments measure their performance against.