WILTON, Conn. (HedgeWorld.com)–Educational endowments with high annual returns report significantly greater allocations to alternative strategies than their lower-return counterparts, according to an analysis of fiscal year 2003 survey data by Commonfund.
Those in the top decile and quartile in a ranking of endowments by annual performance had markedly different asset allocations from study participants as a whole. They invested less in U.S. equity while investing more in alternatives. Within alternatives, they showed broader diversification into private equity and energy and natural resources, with lower percentage allocation to hedge funds.
These institutions had more complex and actively managed portfolios and used a larger number of active managers. They also possessed larger investment staffs.
Hedge funds must have contributed to the better performance of the top group because hedge funds make up nearly half of alternative assets, John Griswold, executive director of the Commonfund Institute, said.
He added that endowment asset allocation held steady during the bear market, following a trend, and continues to hold steady now.