US University Endowment Investment Returns Soar... Ivy League Average 42%

[Image source=AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] It has been confirmed that prestigious universities in the United States achieved significant investment returns in fiscal year 2021 (July 2020 to June 2021). This was thanks to the rapid economic recovery after COVID-19, which greatly increased the value of assets such as stocks.

Among the eight Ivy League universities, six universities excluding Columbia and Princeton, which did not disclose their investment returns, recorded an average investment return of 42% through fund management in fiscal year 2021. This exceeds the 38% increase in the S&P 500 index over the one-year period ending in June this year.

Harvard University's endowment grew to $53.2 billion. It increased by a whopping $11.3 billion over one year. This was due to both an increase in donations and an investment return of 33.6% on the donated funds. The investment return was significantly higher compared to 7.3% in fiscal year 2020.

Harvard University has the largest endowment. Although it increased its fund by $11 billion over one year, there are only about ten universities in the U.S. that hold endowments exceeding $11 billion.

However, Harvard's investment return was below average. Harvard explained that it invested with lower risk than other universities, and this was the opportunity cost of that strategy.

Yale University, which has the second largest endowment, posted a 40.2% investment return in the last fiscal year. This is the highest in 20 years and the third highest since 1970. Yale's endowment grew to $42.3 billion, an increase of $11.1 billion compared to the previous year.

The Ivy League university with the highest investment return was Brown University, which recorded 51.5%. Its endowment grew to $6.9 billion. The fund donated $194 million to the university, which corresponds to 15% of Brown University's operating budget.

Cornell University, which had an investment return of only 1.9% in fiscal year 2020, also saw a significant increase to 41.9% in fiscal year 2021. This is the highest return in 35 years. Its endowment grew to $10 billion.

[Image source=Reuters Yonhap News]

The University of Pennsylvania achieved a 41.1% investment return. Its investment return was only 3.4% in fiscal year 2020. Pennsylvania's endowment increased by $5.6 billion over one year, growing to $20.5 billion in total.

Dartmouth College achieved a 46.5% investment return, growing its endowment to $8.5 billion. The fund donated $335 million to the university, which accounts for about one-third of Dartmouth's annual operating budget.

Universities outside the Ivy League also posted substantial investment returns. The Massachusetts Institute of Technology (MIT) recorded a 55.5% return, increasing its endowment to $27.4 billion. It grew by $9 billion in one year.

The University of Washington also recorded a 65% investment return. Its endowment grew to $15.3 billion. Duke University increased its endowment to $12.7 billion with a 56% investment return.

The New York Times analyzed that one reason university endowment funds recorded high investment returns was due to increased investments in private equity and hedge funds recently. Although university endowments have faced much criticism for paying huge fees to private equity and hedge funds, this time they proved the reason for their investments with surprisingly remarkable investment returns.

Harvard's endowment invests about one-third of its total managed assets in private equity, and the private equity investment return in the last fiscal year was 77%. It is also known to have posted record returns in venture capital investments.

The University of North Carolina achieved a 42.3% investment return in fiscal year 2021. UNC specifically reported a 90.6% investment return in the private investment sector. More detailed figures showed that private equity and venture capital investment returns were 142%, while buyout and growth equity funds investment returns were 44%.