Key Takeaways
- • MIT, Yale, Dartmouth, and Duke each posted returns exceeding 40 percent in fiscal year 2021 (ending June 30), with MIT and Duke reaching 56 percent, demonstrating exceptional performance across elite university endowments.
- • Harvard's $53 billion endowment, the largest in the U.S., returned 34 percent—trailing many peers but still delivering what management characterized as "tremendous" returns while accepting lower risk than competitors.
- • Private equity investments drove outsized gains, with Harvard's PE portfolio (one-third of total assets) returning 77 percent; University of North Carolina's venture capital allocation logged 142 percent returns from its $10 billion endowment.
- • The broader endowment sector delivered an average return of 30.6 percent net of fees for the 12-month period ending June 30, 2021, with the median endowment returning 36.8 percent, sharply outperforming the prior year's 1.8 percent average.
- • Rising allocations to alternative investments—private equity, venture capital, and hedge funds—have become central to endowment strategy despite hefty fees, justified by managers as essential diversification from traditional stock and bond markets.
Summary
University endowments delivered exceptional returns in fiscal year 2021, validating years of heavy allocations to alternative investments despite persistent criticism over management fees. MIT reported a 56 percent fiscal-year gain, Yale posted 40 percent (its third-highest annual return since 1970), and Dartmouth and Duke each achieved approximately 47–56 percent returns. Harvard, managing the nation's largest endowment at $53 billion, trailed this cohort with a 34 percent return but characterized the result as "tremendous" given its deliberate choice to assume lower risk than peer institutions.
Private equity investments emerged as the primary driver of outperformance. Harvard's PE holdings, representing one-third of its total portfolio, delivered 77 percent returns in the fiscal year. Venture capital allocations proved even more explosive—the University of North Carolina generated a 142 percent return from its venture capital segment within its $10 billion endowment. These results underscore why endowments have systematically increased their exposure to alternative assets in recent years, a strategic pivot justified by managers as providing crucial diversification from public equity and fixed-income correlations.
Industry-wide performance was robust. The average endowment return reached 30.6 percent net of fees for the 12-month period ending June 30, 2021, compared to just 1.8 percent in the prior year. Median returns among all endowments stood at 36.8 percent. Elite institutions managing $1 billion or more in assets posted a median return of 36 percent. The aggregate market value of all college and university endowment funds reached $927 billion by fiscal year-end 2021, representing a 34 percent increase from the prior year.
While the bumper returns vindicated the endowment model's reliance on alternative investments and the fees associated with them, the strategy's success remained partially dependent on favorable market conditions during the fiscal period, particularly strength in venture capital and private equity fundraising and valuations. Endowment boards have justified continued allocation to alternatives on the basis of long-term diversification benefits and inflation protection rather than annual returns alone.
Private equity investments emerged as the primary driver of outperformance. Harvard's PE holdings, representing one-third of its total portfolio, delivered 77 percent returns in the fiscal year. Venture capital allocations proved even more explosive—the University of North Carolina generated a 142 percent return from its venture capital segment within its $10 billion endowment. These results underscore why endowments have systematically increased their exposure to alternative assets in recent years, a strategic pivot justified by managers as providing crucial diversification from public equity and fixed-income correlations.
Industry-wide performance was robust. The average endowment return reached 30.6 percent net of fees for the 12-month period ending June 30, 2021, compared to just 1.8 percent in the prior year. Median returns among all endowments stood at 36.8 percent. Elite institutions managing $1 billion or more in assets posted a median return of 36 percent. The aggregate market value of all college and university endowment funds reached $927 billion by fiscal year-end 2021, representing a 34 percent increase from the prior year.
While the bumper returns vindicated the endowment model's reliance on alternative investments and the fees associated with them, the strategy's success remained partially dependent on favorable market conditions during the fiscal period, particularly strength in venture capital and private equity fundraising and valuations. Endowment boards have justified continued allocation to alternatives on the basis of long-term diversification benefits and inflation protection rather than annual returns alone.
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