University of Kansas' $2.1 billion endowment returned a net -2.8% for the fiscal year ended June 30.
The Lawrence-based endowment's return was well ahead of the benchmark return of -11.1% for the period, said James G. Clarke, senior vice president of investments and treasurer at KU Endowment, a non-profit organization that oversees the endowment for the university, in an email.
For the three, five and 10 years ended June 30, the endowment returned an annualized net 10.3%, 9.3% and 8.6%, above the respective benchmarks of 4.2%, 4.9% and 6.1%.
The endowment had returned a net 37.1% for the fiscal year ended June 30, 2021.
For the most recent fiscal year, the endowment's performance like many of its contemporaries was a result of struggles in the public equity and fixed-income markets, although KU Endowment's results fell above the median return of -3.1% among the 22 university endowments for the fiscal year ended June 30 measured by Pensions & Investments as of Tuesday.
The endowment benefited considerably from significant exposure to private investments, marketable alternatives (hedge funds) and real assets, which makes up over 62% of the endowment's total assets.
In his address to KU trustees that Mr. Clarke shared in his email, he said the endowment's ability to avoid a deeper drawdown was a function of positive returns from those three asset classes.
"Private equity and venture capital strategies recorded a 2.1% gain during this period. This allocation has roughly tripled in size over the past several years and is one of our most consistent sources of attractive absolute and relative returns," Mr. Clarke said. "Real assets advanced 14.5%, powered by public and private energy investments. Central banks can conjure up infinite amounts of money, but barrels of oil and electrons still cannot be produced on a printer. Finally, Marketable Alternatives gained 7.7%, outperforming the -3.1% loss for its benchmark from Hedge Fund Research, Inc. This category has been repositioned over the past few years to take less equity risk, focus more on absolute returns and protect against a period when bonds fail to provide diversification benefits (correlations to equities turn from negative to positive)."
Those positive returns partially offset public equity and fixed-income returns. Mr. Clarke said investment-grade bonds lost 8.1% during the period, while domestic equities lost 15%.
As of June 30, the endowment's actual allocation was 30.1% private investments, 19.2% marketable alternatives (hedge funds), 13.4% real assets, 8.7% domestic equities, 7.3% international equities, 6.5% global equities, 5.3% emerging markets equities, 3.8% fixed income, 3.7% opportunistic investments and 2% cash equivalents.
The target allocation is 30% private investments; 16% marketable alternatives; 12% real assets; 8% each domestic equities, global equities and international equities; 6% each emerging markets equities and opportunistic investments; 5% fixed income; and 1% cash equivalents.
