Duke Endowment to the Moon

A smart Coinbase investment launched Duke into rare heights in FY 2021. We use MPI Stylus to estimate the size of Duke’s Coinbase position and its impact on this year’s results.

November 11, 2021

This article is a continuation of MPI Quantitative Research series focusing on 2021 fiscal year endowment performance:
Harvard 2021 | Bowdoin 2021 | UPenn 2021

Duke University’s endowment grew to $12.7 B in FY 2021, on the strength of a 56% return. Even in a year where endowments are putting up superb numbers, that’s a staggering result.

The latest annual report is also a reminder of how good a single allocation bet can be for your bottom line. It’s well-known that Duke was an early investor in Coinbase, which went on to hold its IPO in April of this year. There was no question that this would pay out for the university – the only question was by how much. A March 2021 Coindesk report perfectly captured the ongoing interest leading into the IPO, quoting a source that predicted “They probably 100x’d their money, after dilution.”

A 100x return? Crypto chasers scan message boards and social media looking for a moonshot like that. But as Coindesk points out, Duke didn’t have to go chasing anything. It was Coinbase co-founder – and Duke alumnus – Fred Ehrsam who approached them with the offer. Every endowment should be so lucky.

Whatever the actual size of their investment (more on that later), there’s no question that Duke’s endowment can call 2021 a win. But as the endowment return season comes to a close, CIOs will have to turn their eyes to FY 2022, and that raises a natural question: will endowments try and top themselves next year or should everyone be preparing for returns that are a lot more grounded?

As Bitcoin Goes, So Goes the Coinbase

To understand the true drivers of Duke’s returns, we use the same approach we’ve used in our past endowment analyses. We start with the endowment’s annual returns, as well as various indices representing specific asset classes, and then use MPI’s proprietary Dynamic Style Analysis (DSA) model to come up with a replication portfolio that explains the true drivers of performance.

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