School Endowments Post Poor Returns in 2012

February 8, 2013 (PLANSPONSOR.com) Data gathered from 831 U.S. colleges and universities show their endowments returned an average of -0.3% (net of fees) for the 2012 fiscal year (July 1, 2011 to June 30, 2012).

This is a steep decline from the FY2011 average return of 19.2%, according to the 2012 NACUBO-Commonfund Study of Endowments (NCSE). Over the longer term, ten-year returns for FY2012 were 6.2% compared with 5.6% in FY2011, suggesting that long-term performance for many institutions continues to improve.  

Endowments with more than $1 billion in assets produced the highest FY2012 return, an average of 0.8%. The other categories with positive returns were endowments with assets between $501 million and $1 billion, which reported an average return of 0.4%, and endowments with assets less than $25 million, which reported an average return of 0.3%. All three of the midsized cohorts reported negative returns, the lowest being -1.0% among institutions with assets between $51 and $100 million. Institutions with assets between $101 and $500 million returned -0.7%, while those with assets between $25 and $50 million returned -0.5%.  

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Viewed by asset class, the data show that fixed-income investments generated the highest return, an average of 6.8%, while international equities produced the lowest return, -11.8%. Domestic equities returned 2.0%, alternative strategies as a group returned 0.5%, and short-term securities/cash/other returned 0.2%.

The long-term trend of increasing allocations to alternative investment strategies was observed once again in FY2012; alternative strategies include private equity (LBOs, mezzanine, M&A funds and international private equity); marketable alternatives (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives); venture capital; private equity real estate (non-campus); energy and natural resources (oil, gas, timber, commodities and managed futures); and distressed debt.   

This year’s data indicate that participating institutions’ allocation to alternatives grew by one percentage point to 54%. The alternatives allocation was correlated by endowment size, with institutions having endowment assets in excess of $1 billion reporting a 61% allocation to alternatives and those with assets less than $25 million reporting an average allocation of 11%. The three smaller size cohorts reported the largest allocations to domestic equities and fixed income.  

Of the 831 study participants, 71% said they do not apply environmental, social and governance (ESG) criteria to portfolio holdings, the same as last year. Of the 149 institutions with some form of ESG policy, 60.1% of their portfolio reflects the use of negative screens. Forty-nine percent of these 149 institutions vote proxies consistent with their ESG criteria; 72% of these institutions report that ESG investing is a formal institutional policy.   

More about Commonfund is at www.commonfund.org.

U.S. Bank Adds VPs in Trust and Custody

February 7, 2013 (PLANSPONSOR.com) – Chris Kaiser, John Murphy and Pat Walsh join U.S. Bank Institutional Trust and Custody as vice presidents, business development officers, in its Institutional Trust and Custody division.

Kaiser is based in Danbury, Connecticut, and Murphy works out of U.S. Bank’s Washington, D.C., office. Both report to Edward Buenaga, senior vice president and regional manager. Walsh reports to Karl Wilson, senior vice president and regional manager, in San Francisco. All three are responsible for developing relationships with potential U.S. Bank clients. Walsh works with advisers and recordkeepers to support U.S. Bank’s individually directed accounts (IDAs).

Kaiser brings more than 20 years’ experience to the role, and most recently served as an investment adviser at J.P. Morgan Securities. He received his Bachelor of Arts degree from the University of Delaware in Newark, and his M.B.A. from LaSalle University in Philadelphia.

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Murphy has worked in the financial services industry for more than 30 years. He comes to U.S. Bank from Bank of America, where he served as market director for Institutional Trust and Investments. Murphy earned a Bachelor of Arts degree from Villanova University and Master of Science from Drexel University. He is a member of the American Society Pension Actuaries and the Society of Professional Administrators and RecordKeepers.

Walsh has worked in the financial services industry for nearly 20 years, recently acting as vice president of retirement business services at Charles Schwab & Co. Inc. He earned a Bachelor of Science degree in Business Administration from the University of Notre Dame.

 

Sara Kelly 

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