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Portfolio > Alternative Investments > Private Equity

Endowment Size Continues to Matter in Alternatives Investing and Returns

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NEW YORK (–The latest survey of school endowments by the National Association of College and University Business Officers shows that substantial differences remain between large and small endowments in percentage allocations to hedge funds, private equity and natural resources.

As a group, small endowments invested less of their assets in alternatives. They also received lower returns, which in part may be due to the dearth of alternative investments. Not all individual schools fit this picture, but NACUBO data from annual surveys over the years as a whole has been consistent with it.

As of fiscal year 2004, the 741 U.S. and Canadian institutions that participated in the study had combined assets of US$267 billion. With regard to size of endowment, they range from Harvard University with more than US$22 billion, Yale with US$12.7 billion and the University of Texas System with US$10.3 billion to small colleges with US$2 million or less.

Endowments with greater than US$1 billion had more than 20% of their assets in hedge funds and another 11% in private equity, venture capital and natural resources. These percentages declined with asset size. Thus, endowments between US$100 million and US$500 million had 10% in hedge funds and those less than US$25 million had only 1.8%.

Investments in private equity, venture capital and natural resources also represented lesser portions of small endowments, which had heavier percentage allocations to traditional equity and fixed income.

Average one-year rate of return was 15.1% for the entire survey group. But the largest endowments exceeded 17%, while the smallest groups made less than 15%. Overall, both alternatives allocations and returns tracked asset size, but the findings made public do not contain information about the causes behind these correlations.

Information about ordering NACUBO studies can be found at .

Contact Bob Keane with questions or comments at: [email protected].


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