A Better Approach to Systematic Outperformance?

College and university endowments are charged with earning returns sufficient to meet their internal return needs and objectives.

Fifty-eight years of endowment return data now exist, providing an excellent opportunity to assess the effectiveness of the endowment management. This article is the first to examine endowment returns in relation to both internal and external goals over the entire 58-year period. We find the average return of endowments over the long term has underperformed the annual return need., a typical long-term return goal, and the traditional passive 60/40 benchmark. We conclude that the average endowment would have been better served by simply indexing to the passive 60/40 benchmark.

Article published in the The Journal of Investing, Aug. 2020

Credit: Dennis Hammond, Head of Responsible Investment, Veriti Management LLC