Key Takeaways
- • University endowments posted their lowest median returns since 2009 in fiscal year 2022 (July 1, 2021 to June 30, 2022), according to Cambridge Associates data cited by PitchBook.
- • The 678 universities in the NACUBO-TIAA survey generated an average return of -0.8% in FY22, down sharply from a cumulative 30.6% return in FY21.
- • The University of Texas Management Company overtook Harvard as the largest university endowment by AUM, with $55.1B as of October 31, 2022, per PitchBook data.
- • Harvard's endowment AUM fell from $53.2B in FY21 to $50.9B in FY22 as the university began divesting from fossil fuel companies.
- • Endowments managing $1 billion or more typically hold less fixed income and domestic public equity and more private markets exposure, which helped the largest funds cushion FY22 downturns.
Summary
University endowments experienced sharp declines in fiscal year 2022, driven by global market downturns, record inflation, and volatility across asset classes. According to data from Cambridge Associates, top academic endowments reported their lowest median returns since 2009. The decline followed a period of strong results in FY20 and FY21, when Ivy League colleges recorded their largest returns in years. The National Association of Colleges and University Business Officers (NACUBO) and Teachers Insurance and Annuity Association of America (TIAA) survey of 678 participating universities found that FY21 returns, which benefited from high private equity profits and other risk assets, reached a cumulative 30.6%. In FY22, the same universities generated an average overall return of -0.8%.
Larger endowments entered the downturn with greater alternative exposure. Universities managing $1 billion or more typically invest less in fixed income and domestic public equities than smaller peers, and have more allocation to private markets. In FY22, the largest funds continued to finance private equity, venture capital, and real assets, with hedge funds accounting for roughly 17% of respondents' portfolios on average, according to the NACUBO-TIAA survey.
PitchBook's ranking of endowments by AUM shows a shift at the top. Harvard, which had held the title of largest academic endowment for decades, saw its AUM fall from $53.2 billion in FY21 to $50.9 billion in FY22, according to PitchBook tracked data. The University of Texas Management Company, which manages funds for multiple universities and holds more than 2 million acres of West Texas land, reported $55.1 billion in AUM as of October 31, 2022. Its private equity portfolio was valued at $13.5 billion, or 26.2% of the total portfolio. Yale reported $42.3 billion as of June 30, 2022, and Stanford $40.1 billion as of August 31, 2022. Princeton reported $35.5 billion and MIT $24.7 billion. Harvard's private equity portfolio was valued at $18.8 billion, or 37% of its portfolio, as of June 30, 2022.
Endowments also face growing scrutiny. Criticism has focused on fees paid to private equity firms, sustainable investing, diversity, equity and inclusion practices, and spending. NACUBO's latest study found that more than 80% of respondents had incorporated ESG frameworks into their portfolios, and 65% of institutions reported receiving donations earmarked for diversity, equity, and inclusion initiatives. Congress has also introduced a bill to pressure universities that invest in entities with problematic financial ties to divest.
Larger endowments entered the downturn with greater alternative exposure. Universities managing $1 billion or more typically invest less in fixed income and domestic public equities than smaller peers, and have more allocation to private markets. In FY22, the largest funds continued to finance private equity, venture capital, and real assets, with hedge funds accounting for roughly 17% of respondents' portfolios on average, according to the NACUBO-TIAA survey.
PitchBook's ranking of endowments by AUM shows a shift at the top. Harvard, which had held the title of largest academic endowment for decades, saw its AUM fall from $53.2 billion in FY21 to $50.9 billion in FY22, according to PitchBook tracked data. The University of Texas Management Company, which manages funds for multiple universities and holds more than 2 million acres of West Texas land, reported $55.1 billion in AUM as of October 31, 2022. Its private equity portfolio was valued at $13.5 billion, or 26.2% of the total portfolio. Yale reported $42.3 billion as of June 30, 2022, and Stanford $40.1 billion as of August 31, 2022. Princeton reported $35.5 billion and MIT $24.7 billion. Harvard's private equity portfolio was valued at $18.8 billion, or 37% of its portfolio, as of June 30, 2022.
Endowments also face growing scrutiny. Criticism has focused on fees paid to private equity firms, sustainable investing, diversity, equity and inclusion practices, and spending. NACUBO's latest study found that more than 80% of respondents had incorporated ESG frameworks into their portfolios, and 65% of institutions reported receiving donations earmarked for diversity, equity, and inclusion initiatives. Congress has also introduced a bill to pressure universities that invest in entities with problematic financial ties to divest.
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