Private equity and venture capital have generated oversized returns at Bowdoin, Harvard, and the University of Pennsylvania. William M. Brito October 27, 2021 Private University For university endowments in fiscal 2021, asset allocation played a much larger role in returns than manager selection. According to a new analysis from Markov Processes International, the disparity in returns between asset classes was the biggest contributor to the outperformance of these endowments in 2021. The investment research firm then determined that endowments that allocated more Money in private equity and venture capital outperformed their peers. MPI’s Analysis Provides Additional Transparency in Some of the Largest Pools of Capital in the United States MPI used its proprietary style analysis based on returns to examine FY2021 performance at the University of Pennsylvania, Bowdoin College and Harvard Management Company in a series of reports, the most recent of which was released on Wednesday. . “There is such a disparity between the reported returns in different asset classes,” said Michael Markov, co-founder and CEO. “In times like these, asset allocation is key. When all the performances are the same, then there is selection and competence. MPI’s research builds on theories advanced by William Sharpe, who won a Nobel Prize in 1990 for his work in economics. According to Markov, who spoke to Institutional Investor via Zoom, the idea is to recreate a portfolio that mimics the annual returns of an endowment and its changing allocations over time. This model can reveal discrepancies between publicly reported and simulated portfolios. What is particularly noteworthy is that MPI does not need detailed information about individual investments to perform the analysis. “You can see how the style of investing has changed without even knowing their portfolio holdings,” Markov said of the model. In the cases of Bowdoin and Penn, the MPI models were generally consistent with the portfolio positioning endowment’s own characterization. Bowdoin, which posted an impressive return of 57.4% for fiscal 2021, has shifted its $ 2.72 billion portfolio towards private assets, especially venture capital, over the past decade. “Our analysis shows that this is done to the detriment of hedge funds (absolute return strategies), which Bowdoin confirms in its annual reports,” according to the MPI study. Likewise, Penn posted big returns for the year – 41.1% on his $ 20.5 billion portfolio. Since 2005, the university has increased its allocation to private equity at the expense of fixed income, according to the report. “This year is basically a competition for who has less cash and more aggressive growth,” Markov said. Harvard, meanwhile, returned 33.6% on its $ 53.2 billion portfolio for fiscal 2021. MPI pointed out that these were the lowest endowments in the Ivy League during fiscal year 2021. Unlike the Bowdoin and Penn reports, Markov identified discrepancies between his model and the allocations reported by Harvard. Markov’s analysis showed 30 percent exposure to corporate and government bonds, up from the 12 percent reported by Harvard. Likewise, the model showed exposure to hedge funds of less than 20%, instead of the 33% reported by Harvard. The analysis indicated that one possible explanation for the differences is that Harvard may have a hedge fund allocation focused on neutral market, credit and relative value strategies. Yet MPI’s model shows that exposure to Harvard bonds has increased since 2014, despite its peers significantly increasing their equity investments during the same period. According to Markov, each of these reports reveals the need for a sound asset allocation strategy when there is a large dispersion between asset class returns. “It’s clearly the asset allocation game this year,” Markov said. “When you spend millions on manager selection, but at the end of the day it’s all about asset allocation, you have to ask yourself: Is this justified? ” Related posts: Ohio Supreme Court Judge Pat DeWine Will Not Recuse From Lawsuit: Capitol Letter 3 college friends have started a billion dollar business selling used cars Schlissel announces that he will end the presidency of the MU in June 2023 Texas has raised $ 54 million in private donations for its border wall plan. Almost everything came from this billionaire. Leave a Reply Cancel ReplyYour email address will not be published.CommentName* Email* Website Save my name, email, and website in this browser for the next time I comment.