The Ivy League endowments just got a fresh reminder that you can’t have it all.
Yale, Harvard, and their Ivy counterparts have long been the leaders in endowment performance to the point that everyone wants someone from Yale on their own endowment teams. In 2014 the Ivies were left in the dust of Iowa liberal arts school Grinnell College and the University of Minnesota, both of which had a 20.4% return, reports Bloomberg.
Last year wasn’t the first time the Ivies didn’t get top investment grades. Over the last five years, the University of Virginia and the Quaker liberal arts school Swarthmore College had the best performance. Harvard meanwhile, the world’s richest college, was ranked number 65. Ouch.
It seems the students have surpassed the teachers. Yale and Harvard were among the first endowments to embrace risk by snapping up private equity, commodities, timber and other “exotic” investments. That approach has become common, and others are just doing it better. The top performing endowments tend to hold more than 60% of their portfolios in alternative investments such as these. Writes Bloomberg:
“There’s an emerging new breed of endowment stars,” says Steven Kaplan, a finance professor at the University of Chicago’s Booth School of Business. Yale and Harvard “figured it out first, but it’s hard to maintain an advantage.”
Of the 100 schools with the largest endowments, 85 reported their 5-year annualized returns to Bloomberg. They are ranked as follows:
1. UVA
2. University of Illinois
3. Columbia
4. Duke
5. Swarthmore
6. Princeton
7. Middlebury
8. Bowdoin
9. Penn State
10. University of Iowa Foundation
Ohio State University’s $3.5 billion endowment has the honor of having the lowest 10-year annual return, 5.4%. The school replaced its CIO last year.
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