Five-year endowment performance: no bed of roses
Chief investment officers at endowments, foundations, and family offices are the top guns of the institutional investment world. They have an infinite investment horizon, a global playing field, and can invest in anything anywhere - within the broad policy limits set by their institution.
We, and many others, regard the CIOs at major American universities and foundations as the best of the best.
We lean heavily on university endowments for our performance studies and benchmarks because that's where the data is.
Foundations, family offices, and Wall Street firms employ top investment professionals, but it's difficult to extract meaningful data from opaque sources. So, we go with what we can get.
A five-year return: the Goldilocks number
Institutions go on forever, but chief investment officers unfortunately don't.
Five-year returns give us a good -- albeit imperfect - picture of how CIOs are doing their jobs. A longer timeframe would blur the responsibility for results as CIOs come and go.
In our chart below, the median tenure of CIOs happens to be exactly 5 years. (The mean is higher, tipped by a handful of very senior CIOs.)
In our SEER reports (aka: Skorina's Enhanced Endowment Reports) we use the five-year rankings for our own headhunting purposes, and we let you look over our shoulders.
Boards and investment committees set broad policies. Executing those policies in the day-to-day scrum of the markets -- especially in the hiring, firing and monitoring of external managers -- is the province of the CIO and his/her staff. As recruiters, we try to understand who's doing it well, or not so well.
Risk versus return – it’s personal
We know that nominal returns don't reflect the different risk-appetites of different investors; and ranking doesn't tell the whole story.
There may be good reasons why one institution prefers a more, or less, conservative risk-return trade-off versus its peers. We'll say more on that point down below. But five-year nominal return is our starting point.
Our dataset consists of 34 big, over $1 billion AUM, North American endowments reporting as of early December.
That's only about a third of the whole big-endowment roster. It leaves about 50 who have yet to be heard from, and another dozen or so who disdain to report their returns at all, even when we ask politely.
But our gang of 34 is big enough to show us how the whole league has performed, and it includes many of the brand-name schools and all the traditional Ivys.
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