The Endowment Index calculated by Nasdaq OMX rose 10.14% to 1,517.54 in 2020 to end a second straight year with a record high. However, the index still underperformed a global portfolio of 60% equities and 40% fixed income, which returned 13.77% during the year.
Not surprisingly, the index had a rough start to the year as the COVID-19 pandemic exploded during the first quarter and sent global stock markets crashing. As a result of the global asset sell-off, the index tumbled to 987.70 on March 23. But, from that point, the index soared nearly 54% during the remainder of the year.
The strong investment returns were attributed to world governments’ unprecedented response to the pandemic, including massive monetary and fiscal stimulus and a concerted global effort to develop a vaccine for COVID-19. These efforts restored investor confidence and global markets began to rebound strongly.
The index represents the investable opportunity for managers of portfolios using the ETF Model Solutions’ Endowment Investment Philosophy or who incorporate alternative investments within a comprehensive asset allocation. The index measures performance for a multi-asset, globally diversified portfolio, and applies an objective construction methodology based on portfolio allocation data from more than 770 educational institutions. Each of the index’s 24 sub-indexes are investable and have more than 44,000 underlying securities.
Of the 24 components of the index, 19 saw gains for 2020 with 10 posting double-digit returns. They were led by emerging market equity–China, which surged 37.42%, followed by metals and mining, and gold, which increased 26.97% and 23.86%, respectively. US equity assets closed the year up 20.95%, while emerging markets, and commodity–timber gained 18.18% and 18.11%, respectively.
Other asset classes with double-digit gains for the year included global equities (16.74%), commodity–private agriculture (14.73%), private equity/venture capital (VC) (13.34%), and US Treasury inflation-protected securities (TIPS) (10.94%).
At the opposite end, the worst performing asset classes were commodity–oil and gas, and publicly traded master limited partnerships, which tanked 32.75% and 32.39%, respectively, during the year, followed by commodity/dividend-futures, which fell 11.64%. The only other asset classes to post losses for the year were international real estate and domestic real estate, which declined 6.87% and 4.72%, respectively.
Although it didn’t beat a 60/40 portfolio, the Endowment Index easily outperformed the aggregate performance of the Ivy League’s endowments, which collectively returned 6.3% for fiscal year 2020. It also surpassed each Ivy League endowment, except for Brown University’s endowment.
2020 Endowment Index Constituent Asset Class Performance
Em. Market Equity – China
Private Eq-Distressed Debt
Commodity – Met/Mining
Emerging Mkt Fixed Inc
Intl Developed Fixed Inc
Commodity -Natural Resources
Commodity – Timber
Liquidity – TBills
Commodity – Pvt. Agriculture
Domestic Real Estate
Intl. Real Estate
Intl Developed Equity
Publicly Traded MLP’s
Domestic Fixed Inc.
Commodity – Oil & Gas