Measuring The Ivy 2018 Halftime Report: PE, VC Exposure Seen As Driving Endowment Performance
At the midway point of fiscal year reporting for the Ivy League endowments, our research team analyzes what we know so far to identify the key drivers of returns.
With half of Ivy League endowments (Dartmouth, Penn, Harvard and Yale) having reported their fiscal year 2018 returns, it looks like the Ivies are going to have another strong year, as they did in fiscal year 2017. Our early projections indicate that private equity and venture capital appear to be driving the bulk of returns (see Figure 1).
To gain early insight into 2018 performance, we ran an analysis of the Ivies using published annual performance data and indices that correspond to the asset classes commonly disclosed in annual endowment reports (see Figure 2). This enabled us to create factor-mimicking portfolios for each Ivy endowment using our patented Dynamic Style Analysis (DSA)1 model.
For endowments that have already reported 2018 fiscal year returns, we used those portfolios to estimate how much return each asset class contributes. For the endowments that haven’t reported returns yet, we followed an approach that we used in our recent deep dive into the hidden risks of the endowment model. Using the factors and exposures obtained as of fiscal year 2017—and assuming that portfolio exposures did not change in fiscal year 2018—we estimated fiscal year 2018 performance by multiplying 2017 exposures by the factor returns in fiscal year 2018.
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