Endowment Index Declines 0.36% in Q1

Tracking portfolio reverses last year’s gains after surging in January.

The Endowment Index calculated by Nasdaq OMX ended a rollercoaster first quarter down 0.36%, after having risen 5.51% in the first 26 days of the year. 

After gaining 17.6% in 2017, the index looked poised for another strong year as it surged along with the equity markets in January. However, it made an abrupt U-turn when concerns over rising US interest rates led to a correction in global markets. According to Nasdaq OMX, the index peaked on Jan. 26, up 5.51% from the end of December. However, the volatile markets helped push the index to a loss of 2.34% on Feb. 8, before rebounding to end the quarter slightly lower. The loss was below that of the S&P 500, which fell 0.76% during the same period.

“While 2017 was a year of steady improvement and unusually low volatility for global financial markets, the first quarter of 2018 ushered in a change in that environment,” said Nasdaq OMX in a release. “Changes in US trade policy with respect to tariffs put a damper on the ensuing bounce, and the Index closed nearly unchanged to end the quarter.”

Of the index’s 19 components, 11 posted loses, while eight saw gains during the quarter. Natural resources-timber was the top performer, rising 2.58%, followed by gold, and emerging markets, which increased 2.09% and 1.20% respectively.  Domestic real estate weighed down the index, falling 8.12% during the first three months of 2018, while natural resources – metals & mining, and emerging market bonds lost 4.18% and 2.16% respectively.

For 2017, the top earners were natural resources-metals and mining, emerging markets equity, emerging markets equity-China, natural resources-timber, international real estate, and equity-international developed.

The index represents an asset allocation used by major universities’ endowments, which includes stocks, bonds, and alternative investments, such as hedge funds, private equity, and real assets. It is intended to provide an objective tool for portfolio comparison, investment analysis, research, and benchmarking. Its methodology is based on the portfolio allocations of more than 800 higher learning institutions managing over $500 billion in total assets.  Contained within each of the 19 components are more than 30,000 underlying securities, with a current target allocation of 52% alternatives, 36% equity, 8% fixed income, and 4% liquidity, which is represented by the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF, which seeks to provide investment results that correspond to the performance of the Bloomberg Barclays 1-3 Month U.S. Treasury Bill Index.

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