Endowments Make Significant Investment in Hedge Funds

November 20, 2006 (PLANSPONSOR.com) - The 53 largest US endowments have so far invested a total of $40 billion of their assets into hedge funds, mainly in the last five years, according to data from InvestHedge.

An InvestHedge press release said, on average, the endowments in its Billion Dollar Endowment Club are setting aside 20% of their assets for absolute return investing. At least 77% of all endowments invest in hedge funds, and of those, nearly half invest directly in funds, InvestHedge said.

Harvard University with $29.2 billion in assets tops the Billion Dollar Endowment Club universe, and, in absolute terms, it is also the largest hedge fund investor with roughly $5 billion invested in hedge funds. The $3.4 billion University of Virginia fund has the highest allocation to hedge funds at 51.7% of its portfolio or $1.76 billion. Coming in close second is the $1.4 billion University of Richmond portfolio, which invests 45% of its assets directly into hedge funds.

Amherst College, Brown University, Columbia University and the University of Notre Dame all invest more than 30% of their endowment assets in hedge funds.The endowment funds of Harvard University, Yale University, University of Texas Investment Management Company, Stanford University, Princeton University, Massachusetts Institute of Technology, Columbia University, University of Notre Dame, University of Chicago and the University of Virginia each have more than $1 billion invested in hedge funds.

In terms of performance, most endowments are able to surpass the rate of inflation and significantly fund campus improvement and scholarships, according to InvestHedge. Stanford University had the top performing hedge fund portfolio with annualized returns of 17% as of the end of fiscal year 2005. The average annual return for an endowment with $1 billion or more in assets has been 15.34%.

The Yale University endowment fund, which reported an annual return of 22.9% this year, can in part attribute its gains to hedge fund strategies that have returned 13.1% annualized for the last 10 years ending June 2005.

InvestHedge provides information on those investing in hedge funds including institutional investors, family offices, and fund-of-funds throughout the world. It is published by HedgeFund Intelligence. More information can be found at  www.hedgefundintelligence.com .