This study is based on a survey that Cambridge Associates (CA) administers annually to our college and university clients. The report that follows summarizes returns, asset allocation, and other investment-related data for 152 institutions for the fiscal year ended June 30, 2021. This year’s report includes commentary and exhibits that are spread across six separate sections.
Fiscal year 2021 will go down in the record books as a year that delivered some of the best investment performance that endowments have ever seen. Although endowments across the board earned exceptional returns, the range of outcomes was the widest it has been in more than 20 years. Our Investment Portfolio Returns section highlights performance results for this past fiscal year. This section investigates some of the factors that contributed to the historically large variation of peer returns and what made top performers in particular stand out. It also includes analysis on investment performance over multiyear trailing periods and how this most recent fiscal year helped boost longer-term results.
Endowments not only generated very high returns on an absolute basis in fiscal year 2021. The vast majority of respondents to our survey also outperformed their policy portfolio benchmarks for the year, including some by extremely large margins. But what components are most commonly used in policy benchmarks? Our Investment Policy section touches on this topic and how peer practices for benchmarking private equity have changed over the past decade. Also included in this section are data on real return objectives and how asset allocation strategies among endowments can differ from a policy perspective.
CA has been conducting this survey for several decades and this gives us unique insights into trends in asset allocations over the long term. The Portfolio Asset Allocation section highlights how endowments have evolved in investing their portfolios from the early 2000s to today, with a particular focus on the increased equity exposure that endowments have taken on in recent years. This section also incorporates data on target asset allocations to lend insights into how institutions are altering their portfolios heading into the future.
The number of managers that endowments use for their overall portfolio and within specific asset classes can vary widely. Our Investment Manager Structures section explores data on this topic, as well as implementation strategies for traditional assets (i.e., active versus passive management) and alternative assets.
Meanwhile, the Institutional Support section contains analyses that highlight how much colleges and universities rely on their endowments to support their annual operating budgets. Also included in this section are exhibits on spending policies, portfolio inflows and outflows, operating funds, and endowment market values relative to outstanding debt.
Finally, our Investment Office Staffing and Governance section of the report takes a look at topics such as the number of personnel in the investment office and the investment committee structure. Also included are analyses on how endowments use outside advisors/consultants and who has decision rights for asset allocation policy development and manager selection.