Ivy League Performance Update

| October 11, 2019
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This week’s Bloomberg column from Barry Ritholtz looks at the lackluster collective performance of Ivy League university endowments:

  • Harvard: 6.5%,
  • Yale 5.7%;
  • University of Pennsylvania 6.5%;
  • Dartmouth 7.5%;
  • Brown 12.4% (Smallest Ivy endowment of ~$4 billion)
  • (Princeton, Cornell and Columbia have yet to report).

Other notable near-Ivy League status endowments:

  • Massachusetts Institute of Technology (MIT) at 8.8%,
  • Stanford at 6.5%
  • Duke at 6.9%.

Benchmarks of note:

  • 60/40 portfolio 9.9%
  • Standard & Poor’s 500 Index 10.4%

This underperformance is consistent with the record of the past decade, with none of the Ivy endowments beating a 60-40 portfolio in the 2008-2018 period, though a couple did come close.

The biggest contributors to the weak performance of endowments were high exposure to hedge funds (2019 returns = 1.1%) and natural resources (2019 returns = -6.8%). Add to that the high operating costs that many endowments’ have and you see another large drag on compounded returns.

As is the case with most things in human nature, expectations need to be maintained and probabilities need to be measured. During a bull market such as what we have seen with only a few noticeable pullbacks (i.e., 4th quarter of 2018), well diversified endowments will underperform.

However, during a prolonged period of economic and market weakness, those high fee investments will (hopefully as they have historically) payoff with outperformance.

Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O

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