This despite that some endowments had strong gains in the past year.
Harvard University, the world’s richest school, with a $32 billion endowment, rose 21 percent in the year ended June 30. The $19.4 billion fund at Yale in New Haven, Connecticut, rose 22 percent.
Columbia University’s $7.8 billion fund in New York was the best performer among the eight Ivy League schools last year, with a 24 percent gain.
Endowments, especially larger ones, have boosted their reliance on hedge funds as they seek returns higher than the inflation-adjusted spending rates of universities. Endowments with more than $1 billion had 60 percent of their assets devoted to alternative strategies such as hedge funds, compared with 10 percent for those with less than $25 million. That strategy has backfired as elevated stock-market volatility has sapped hedge fund returns since 2008.
“Hedge funds have been struggling -- active management has been difficult,” Verne Sedlacek, Commonfund’s chief executive officer, said at the briefing in New York. “Hedge funds didn’t do as well as the stock market and relative to other alternative investments for the one-year period.”
Commonfund, based in Wilton, Connecticut, manages more than $24 billion for not-for-profit clients and surveyed 823 U.S. schools.
Hedge funds fell 4.9 percent in 2011 as the European debt crisis prompted a worldwide aversion to risk and market volatility rose, according to the Bloomberg aggregate hedge-fund index. The U.S. benchmark Standard & Poor’s 500 Index was mostly unchanged in 2011.
Smaller endowments, with less of their assets in alternative investments, did better than their larger counterparts over the past three years, according to the report. Over five- and 10-year periods, larger endowments did better, the report said.
The average endowment’s allocation to alternative strategies such as hedge funds, private equity, real estate and commodities climbed to 53 percent from 52 percent the previous year. Commodities and managed futures returned the most among alternative investments, advancing 26 percent, while private equity rose 19 percent.
