The University of Virginia’s endowment fiscal year returns came in over 50% short of its benchmark, as private market losses filter through limited partners’ portfolios.
As university endowments begin to report their fiscal year 2024 results, UVA’s performance is indicative of a widespread private market drag on portfolios. The $14.2 billion portfolio returned 7.5% for the twelve months ending June 30, 2024, falling well below its 15.3% policy benchmark for a one-year annualized return.
The University of Virginia Management Company (UVIMCO), which is responsible for investing the endowment, attributes the underperformance to its large private markets allocation. At the end of FY 2024, 27% of the endowment was allocated to private equity.
Private markets’ drag on performance is, in part, a product of the lag between public markets and private asset classes that has led 2022’s stock market dip to show up in PE’s 2023 and early 2024 returns. From Q2 2022 to Q2 2023, buyout strategies’ estimated profitability dropped nearly 40%, according to PitchBook data.
Limited exit opportunities for fund managers, along with the valuation gap between asset buyers and sellers, have also contributed to the asset class’s modest returns.
Like many other private asset-heavy university endowments, UVIMCO experienced even more acute underperformance in FY 2022-23, when the portfolio generated a 2% gain, falling well below its 12.3% benchmark. In that instance, chief investment officer Robert Durden pointed to a 5.3% decline in the private equity portfolio as the root cause.
Also last year, the Ivy League’s endowments saw some of the worst performance they have seen in the past decade. Princeton University’s endowment suffered the most, with a 1.7% loss on its investments, and Harvard’s endowment returned only 2.9% for the fiscal year.
The disappointing performance is bleeding into returns for the most recent fiscal year. The University of California system’s $22.6 billion general endowment pool, which invests its endowed gifts funds, also experienced a private market drag on its overall performance for the 2023-24 fiscal year. The overall portfolio underperformed its benchmark, weighed down by PE investments that fell 25.3 percentage points short of their policy benchmark.
In another example, the University of Colorado Foundation, which invests over a quarter of its $2.7 billion portfolio into private capital, also missed its return target for the fiscal year.
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