Endowments Embrace Alternative Investments

March 19, 2001 (PLANSPONSOR.com) - Higher education endowments are making a larger commitment to alternative asset classes, according to a new study.

The Greenwich Associates study of 563 endowments found that 60% invest in alternative asset classes, which now comprise 23% of their portfolios, on average.  The Commonfund Institute commissioned the study.

Not surprisingly, larger institutions allocate more funds to private equity, hedge funds and venture capital.  Endowments with more than $1 billion investing nearly a third (29%) of their funds in alternative investments, compared with just 5% of the assets of endowments with less than $10 million in assets, according to Dow Jones.

Of the investment in alternative investments, the average institution is investing:

  • 28% in hedge funds
  • 24% in venture capital
  • 22% in private equity

The study also found that large endowments tend to be more successful investors.  Endowments of more than $1 billion earned an average return of 23.9% last year, compared with just 13.7% on average for those with less than $10 million.