Endowment Index Surges 20.19% in 2019

China helps index rebound sharply from previous year’s 9% decline.

The Endowment Index, as calculated by Nasdaq OMX, surged 20.19% in calendar year 2019, marking its best performance in a decade. The index closed the year at an all-time high of 1,377.82 and beat out a portfolio comprised of 60% MSCI All-Country World Index and 40% Barclays Global Aggregate Bond Index, which gained 19.11%.

The performance was in sharp contrast to 2018 when the index fell just over 9%. All but two of the its nineteen components posted gains during 2019, including a dozen asset classes with double-digit returns. In 2018, only three of the 19 asset classes posted positive gains.

The index is based on the portfolio allocations of more than 800 educational institutions that oversee more than $600 billion in total assets. But the robust returns were not indicative of the performance of US university endowments in 2019. No US university endowment came close to the index’s 2019 return as only two – Bowdoin and Brown ­– reported returns above 10% with gains of 12.4% and 10.9%, respectively. It’s worth noting, however, that many endowments’ fiscal year ended in June and included performance that occurred in 2018.

The top performing asset classes for the index were emerging market equity – China, which increased 35.57%, followed by private equity/venture capital and US Equity, which climbed 34.80% and 30.80%, respectively. Domestic real estate rose 28.91%, while commodity – timber, and international developed equity were up 22.83% and 22.67% respectively.

The worst performing asset class was managed futures, which declined 2.73%, followed by commodity/dividend-futures, which lost 1.65%, and liquidity – T-bills, which was up 2.05%.

The year began well with asset prices bouncing back from a 10.22% decline during the last quarter of 2018 and ended with several major indices hitting or approaching record highs. The US-China trade war occupied the news and preoccupied investor concerns throughout the year until a so-called “phase 1” deal was reached in December and calmed things down.

And the Federal Reserve cut interest rates three times in response to signs that the domestic and global economies were slowing, as US unemployment remained at its lowest in half a century. Inflation remained low, and the US economy expanded for the 11th straight year, its longest run ever.

Each of the 19 sub-indexes that make up the Endowment Index is investable and contains more than 34,000 underlying securities.  The current asset allocation target is 52% alternatives, 36% equity, 8% fixed income, and 4% liquidity.

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