As Volatility Returned, Endowment Index Lost Ground in 2018

The Endowment Index calculated by Nasdaq OMX declined 9.09% on a total return basis for the year ended December 31, 2018. 

“After a good start to the year, volatility returned in 2018,” the firm says. “A stronger U.S. dollar weighed on international and emerging markets throughout most of the second half of 2018, although there was no shortage of other investor concerns.”

According to Nasdaq, investors suffered due to global recession fears, U.S. Federal Reserve Rate hikes and higher interest rates, a slowdown in corporate profits, an escalation in the U.S.-China trade dispute and other factors.

“These resulted in a late-year global asset selloff that left few asset classes untouched,” the firm says.

Reflecting many endowments’ global investment approach and use of alternative investments, the index dropped more than twice as much as the S&P 500, which declined 4.38% for the same period. For the fourth quarter of 2018, the Endowment Index declined 10.22%, however, compared to a 13.52% decline in the S&P 500.

Only three of the Index’s 19 components posted gains in 2018: International developed fixed income (2.94%), U.S. T-Bills (1.70%), and managed futures (0.32%). Nasdaq OMX reports eight of the index’s components posted double-digit losses for the year with the worst three being emerging markets-China (28.05%), commodities-timber (21.11%), and commodities oil & gas (19.36%).

The Endowment Index represents a benchmark for analyzing the investable opportunity of managers of portfolios utilizing the “Endowment Investment Philosophy” or who “otherwise incorporate alternative investments within a comprehensive asset allocation.”