The Endowment Index calculated by Nasdaq OMX gained 17.6% on a total return basis for the year ended Dec. 31, 2017. This is below the S&P 500, which increased 21.8% during the same period, but above the average investment returns for university endowments, which rose 13.2% for the year ended June 30, according to Bloomberg.
The Index began the year at 1,072.11, and never once moved below that level, according to Nasdaq OMX. It said the index’s greatest retracement was just 1.64%, which occurred during the first week of August. It is the highest return for the index since 2009, when it earned 30.53% after losing 34.42% the previous year. The index rose 7.19% last year, and its three-, five-, and 10-year annualized returns are 6.87%, 8.20%, and 4.45%, respectively.
All but one of the index’s 19 components posted gains in 2017. The top earners were natural resources-metals and mining, which surged 37.1%, emerging markets equity (up 36.8%), emerging markets equity-China (up 31.8%), natural resources-timber (up 29.8%), international real estate (up 26.5%), and equity-international developed (up 26.4%). Managed futures posted the only decline among index constituents, sliding 3.2% during the course of the year.
On an attribution basis, private equity, equity-domestic, and equity-international developed accounted for over half (56%) of the Index’s 2017 gains.
The Endowment Index, which is co-created by Endowment Wealth Management, Inc. and ETF Model Solutions, uses an objective, rules-based construction methodology based on the portfolio allocations of more than 800 educational institutions managing more than $500 billion in total assets. Each of the 19 sub-indexes that comprise the index are investable, and contained within those sub-indexes are more than 30,000 underlying securities. The current target allocation is 35% equity, 53% alternatives, 8% fixed income, and 4% liquidity.
The index, comprised of investable components, is used for portfolio comparison, investment analysis, and research and benchmarking purposes. It is used by fiduciaries, including trustees, portfolio managers, consultants, and advisors to endowments, foundations, trusts, pension plans, and individual investors.