Endowment Index Falls Over 6% in First Quarter

The Endowment Index, a benchmark based on the portfolios of hundreds of educational institutions, fell 6.32% on a total return basis during the first quarter of the year, underperforming a portfolio of 60% equity and 40% fixed income, which declined 5.62% during the period. [Source]

The lackluster performance was a sharp turnaround from the previous quarter when the index rose 4.38% to end the year up 14.59%. The decline is not surprising, however, with U.S. equities having their first quarterly loss in two years amid global market volatility fueled by Russia’s invasion of Ukraine and rising inflation. [Source]

The index, which was created by ETF Model Solutions and is calculated by Nasdaq OMX, contains 22 sub-indexes that track more than 48,000 underlying securities. The index’s top-performing component during the first quarter was oil and gas, which surged 38.51% thanks to soaring oil prices, while private equity—which normally drives strong gains among endowments—was the worst-performing asset class, tumbling 15.73% for the quarter.

Along with oil and gas, the other components that ended the quarter in positive territory were commodities, metals and mining, publicly traded master limited partnerships, and gold. Weighing down the index with private equity were emerging markets equity—China, which fell 14.64%, and emerging markets fixed income, which lost 9.17% during the quarter.

The index also completed its annual reconstitution and rebalancing during the quarter as equities and fixed-income allocations were reduced by 2% and 1% respectively, while the allocation to alternatives was increased by 3%.

The index measures performance for a portfolio that includes global equity, global fixed income, and alternative investments, including private equity, hedge funds, and real assets. The index’s methodology is based on the portfolio allocation data of more than 700 educational institutions that collectively manage over $820 billion as of June 30, 2021.