The combined average return of 6.7% failed to beat the traditional 60/40 portfolio return of 9.9% this past fiscal year.
Turning in an impressive 12.4%, Brown, which restructured its investment leadership roles at the beginning of the fiscal year, moved to the head of the class in FY 2019 after finishing in second place behind Princeton in FY2018, while the Tigers’ endowment, headed by Andy Golden, moved down to the middle of the class. Following a 6-year run of top or near top of the pack performance, Yale, led by legendary investor and progenitor of the “Yale Model” David Swensen, struggled for the third year in a row, returning 5.7% in FY 2019. Well into their 5-yr transformation under Narv Narvekar, Harvard landed in the middle of the class. Cornell, who have been transforming their investment office and portfolio in an attempt to overcome legacy challenges, turned in a 5.3% return, placing them above only Columbia, a system that has suffered turnover in the CIO seat since Narvekar left for Harvard and rounded out the bottom of the Ivy class this year with a 3.8% result.
Their private equity and venture capital portfolios returned 13.8% and 21.9%, respectively.
Our best theory on 2019 is that the generally poor performance of the Ivies overall versus traditional balanced portfolios, and the relatively high dispersion in returns across the Ivies are the result of individual choices by these endowments from among the investment opportunity set and, in turn, by the investment decisions of their underlying managers, particularly in private market assets. What the Ivy league endowment experience in FY 2019 may highlight for investors is an additional word of caution about private equity investing and return expectations in the vast private company opportunity set: even the top institutional investors with access to the most in demand managers in a period of solid average (index) returns can end up getting hurt by having such large exposure to the wide range of outcomes in private equities.
Read more about the performance analysis here.
Post by Marcelino Pantoja