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Hedge Funds Continue to Gain in Endowments' Altern

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WILTON, Conn. (–Hedge funds now account for 42% of alternative assets in school endowments, a Commonfund survey shows. By contrast, the share of private equity and venture capital has shrunk to 25%.

Across endowments of various sizes, hedge funds take up 41% to 56% of alternatives allocations. The proportion is less for larger endowments, which have higher percentages of assets in private equity, venture capital, equity real estate and natural resources.

But alternatives as a whole are a much more important part of large asset pools. For example, endowments of more than $1 billion had 43% in alternatives, while those in the US$51 million to US$100 million group had only 10%. For all endowments, alternatives comprise 32% of total assets and the allocation target is 35%.

The 637 study participants collectively have US$184 billion in assets and include top universities such as Harvard, Stanford and Yale. Twenty-four have assets of more than US$1 billion. But most are much smaller, such as the 193 institutions that fall in the $10 million to US$50 million category.

This is the second year that the survey indicates negative returns. The entire group suffered a 6% decline, but there were major differences by size, suggesting that greater diversification in big pools helped limit losses. The US$1 billion plus bracket was down only 2.7%, while endowments under $10 million were in the red by 6.9%.

The 42% hedge fund share represents a continuing and significant growth trend in recent years. A Commonfund survey in 2001 showed 28% of alternatives in hedge funds.

Commonfund manages about US$29 billion in assets for non-profit institutions. Its research arm, Commonfund Institute, conducted the surveys. HedgeWorld reported preliminary results from this study in December Previous HedgeWorld Story.

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