Top US university endowments grow hedge fund portfolios to $63 billion

Date: Monday, December 8, 2008
Author: Investhedge

The 60 largest US university endowments, each with $1 billion or more in assets, now total $290 billion in assets of which $63 billion is invested in hedge funds. These investments translate into inflows of nearly $23 billion over the last two years going mostly to single manager hedge funds, according to the InvestHedge Billion Dollar Endowment Club.

Since the last survey carried out in 2006, our original group of 53 endowments have grown by $65 billion and account for $282 billion of the current survey, while the seven new entrants to the InvestHedge Billion Dollar Endowment Club combined represent just more than Harvard University’s hedge fund portfolio or $7 billion.

The university investment pools have grown significantly and financial officers have seemed eager to put more money to work with hedge funds. The majority (71%) have been sticking with direct hedge fund investments – rather than allocating via multi-manager funds of funds.

There are now 15 of the largest university endowments that have hedge fund portfolios with assets totalling more than $1 billion, compared to 10 in 2006, according to the survey published in the latest issue of InvestHedge.

The future growth of these portfolios is obviously in jeopardy given the current market crisis. Unfunded private equity commitments are likely to come from more liquid hedge fund strategies and portfolio rebalancing following equity market losses also puts future hedge fund investment on the backburner.

“Some of the most sophisticated institutional hedge fund portfolios will continue to be found at university investment offices,” said Susan Barreto, Deputy Editor of InvestHedge. “Going forward, however, growth will be more tactical in nature with chief investment officers deciding whether private equity and hedge fund portfolios will require an equal footing in a successful alternative investment programme.”

The biggest university endowments in the U.S. by assets are:

1. Harvard University

2. University of Texas Investment Management

3. Yale University

4. Stanford University

5. Princeton University

6. Massachusetts Institute of Technology

7. University of Michigan

8. Columbia University

9. University of Notre Dame

10. Northwestern University / Cornell University