For university endowments this year, a strong performance meant losing the least.
Metropolitan State University’s endowment bested six other Colorado colleges and universities in a poll by BusinessDen, keeping its losses to less than a percentage point in a year when even Harvard’s mighty $35.7 billion endowment posted a 2 percent loss on investments.
Metro State’s negative investment return of 0.7 percent in the year ended June 30, 2016 beat the average of Colorado schools included in a local survey, which saw an investment loss of 2.3 percent on average over the same period.
Here’s how all of the Colorado schools in a survey by BusinessDen fared:
|College||Assets, 6/30/16||Assets, 6/30/15||ROI, 6/30/16||ROI, 6/30/15||10-YR avg. ROI||Manager|
|University of Colorado Foundation||$1,063,000,000||$1,090,000,000||-2.63%||3.49%||6.11%||Perella Weinberg Partners|
|Colorado College||$651,000,000||$684,000,000||-2.08%||3.89%||6.60%||Monticello Associates|
|University of Denver||$607,000,000||$632,000,000||-2.30%||5.30%||5.48%||Monticello Associates|
|Colorado State University||$286,348,223||$281,355,223||-2.75%||1.80%||5.08%||Unknown|
|Colorado School of Mines Foundation||$247,500,000||$272,500,000||-4.50%||-0.10%||5.10%||Unknown|
|Regis University||$53,633,073||$55,563,838||-1.20%||1.60%||N/A||Sellwood Consulting|
|Metropolitan State University||$7,208,881||$7,181,085||-0.70%||1.50%||3.36%||BNY Mellon|
The investment return highlighted above takes into account only the gains, or in this case losses, each endowment realized as a result of its investments.
That return rate does not take into account changes in a school’s total endowment due to transfers or fees. Left out in those calculations were: contributions from donors, management fees or withdrawals to fund things like college or university operations, capital spending and financial aid.
The 2.3 percent loss these Colorado schools averaged narrowly edged out the 2.7 percent net loss of endowments tracked by Cambridge Associates, a portfolio manager, in the same period. But Colorado far underperformed the S&P 500, which gained 3.25 percent in the same window, according to data from FactSet quoted in the Wall Street Journal.
Tim Keating, president of Keating Wealth Management in Greenwood Village, isn’t surprised. Individuals can beat the market, he said, but Nobel Prize winning economics has shown that the population of money managers will eventually recreate the market.
But most colleges think their endowment will perform above average.
“I believe it is a waste of time, effort and money for these endowments to do what’s mathematically impossible in the aggregate,” said Keating, a financial advisor.
The University of Colorado Foundation is the largest endowment in the poll, ticking down from a market value of $1.09 billion in fiscal 2015 to $1.06 billion in 2016. The CU Foundation had a negative investment return of 2.63 percent.
In an email to BusinessDen, Mike Pritchard, the CFO of the CU Foundation, noted that returns are off to a good start in its 2017 fiscal year: as of August 30, the fund has an investment return of 2.27 percent as of August 30.
Colorado College, with the second largest endowment in the Colorado poll, posted an investment loss of 2.08 percent in its 2016 fiscal year. Their total endowment slumped to $684 million in 2015 to $651 million in 2016.
The Colorado Springs-based college’s endowment, whose assets were managed under the supervision of Monticello Associates in 2016, had the strongest performance over the past decade, with a ten-year average return on investment of 6.6 percent.
The colleges and universities in this sample each end their fiscal years on June 30, with one exception. Regis University typically begins its fiscal year on March 1 and ends on April 30, but reported its assets and rate of return on investment as of June 30 for the purposes of comparison.
The colleges and universities in this poll each oversee their endowments through their boards and/or a subcommittee, which set some guidelines and hire one or more outside firms as investment managers.
BNY Mellon, for example, manages Metro State’s endowment with additional oversight by the university.
And Perella Weinberg Associates is the investment manager of the CU Foundation’s long term investment portfolio, which includes the endowment. The CU Foundation’s board of directors provides asset-allocation guidelines and a CU Foundation committee sets investment policy.
As of June 30, 2016, the CU Foundation’s assets were as follows: 27 percent international equities, 23 percent domestic equities, 21 percent private capital, 13 percent absolute return, 10 percent real assets and 6 percent fixed income and cash. A full list of the asset breakdown for other colleges on the list is here.
Keating, the financial advisor, thinks simplicity is best for most colleges. He recommends that universities set aside fixed income equivalents to fund university operations and other liabilities, then put the rest of the endowment in an equity index fund.