Key Takeaways
- • Northwestern University's $15 billion endowment posted a record 42% annual return for fiscal year 2021 (ending June 30), significantly outperforming peer institutions including Harvard (33.6%), Duke (55.9%), and University of Virginia (49%).
- • University endowments' exceptional returns are directly tied to a venture capital boom tracking its largest gains since the dotcom era, with endowments allocating an average of 23% of portfolios to venture capital and private equity.
- • Software IPOs reached a record $421 billion as of September 30, 2021, driving outsized gains across endowment portfolios heavily weighted toward venture investments.
- • Amy Falls, Northwestern's Chief Investment Officer, is repositioning the endowment toward venture capital managers focused on carbon emission solutions and deploying hedge fund allocations to hedge inflation risk.
Summary
University endowments delivered extraordinary returns in fiscal 2021, with Northwestern University's $15 billion fund among the top performers. The endowment generated a 42% annual return for the fiscal year ending June 30, 2021—a record result that surpassed several peer institutions. Harvard University's $53.2 billion endowment returned 33.6%, while Duke University posted 55.9%, University of Virginia achieved 49%, and Washington University in St. Louis led the peer group with 65%.
These exceptional results stem directly from a pronounced venture capital boom. College and university endowments allocate an average of 23% of their investment portfolios to venture capital and private equity, according to a 2020 joint report from the National Association of College and University Business Officers and TIAA. The venture capital sector is on track to post its largest returns since the dotcom era, according to the Wall Street Journal. A significant driver has been the software IPO market, which reached a record $421 billion in aggregate value as of September 30, 2021, according to Refinitiv data.
Amy Falls, Chief Investment Officer of Northwestern's endowment, outlined the fund's forward-looking strategy in response to the current investment environment. Falls indicated the endowment is actively seeking venture capital managers specializing in innovative companies addressing carbon emission solutions, reflecting both performance-chasing and ESG-aligned positioning. Additionally, Northwestern's investment team is increasing exposure to hedge funds as a portfolio hedge against anticipated inflation risks. This dual approach—pursuing growth through climate-focused venture capital while deploying defensive strategies through hedge fund allocations—reflects institutional concern about macroeconomic headwinds despite near-term endowment strength.
These exceptional results stem directly from a pronounced venture capital boom. College and university endowments allocate an average of 23% of their investment portfolios to venture capital and private equity, according to a 2020 joint report from the National Association of College and University Business Officers and TIAA. The venture capital sector is on track to post its largest returns since the dotcom era, according to the Wall Street Journal. A significant driver has been the software IPO market, which reached a record $421 billion in aggregate value as of September 30, 2021, according to Refinitiv data.
Amy Falls, Chief Investment Officer of Northwestern's endowment, outlined the fund's forward-looking strategy in response to the current investment environment. Falls indicated the endowment is actively seeking venture capital managers specializing in innovative companies addressing carbon emission solutions, reflecting both performance-chasing and ESG-aligned positioning. Additionally, Northwestern's investment team is increasing exposure to hedge funds as a portfolio hedge against anticipated inflation risks. This dual approach—pursuing growth through climate-focused venture capital while deploying defensive strategies through hedge fund allocations—reflects institutional concern about macroeconomic headwinds despite near-term endowment strength.
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