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Returns on investments in university endowments fell to zero after they saw their biggest gain in a generation a year earlier, reflecting a dramatically changed investment environment in which stocks, bonds and other assets have sold off sharply.

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Donations from Washington University in St. Louis lost 10.6% in the fiscal year ended June 30, after rising 65% the previous year, the school told The Wall Street Journal, cutting its size to $13.3 billion. Other schools that have reported big fluctuations in their multibillion-dollar donations include Stanford University, which lost 4.2% after rising 40.1% earlier; Brown University is down 4.6% after increasing 51.5%; and the Massachusetts Institute of Technology, down 5.3% after rising 55.5%.

According to a preliminary estimate by Cambridge Associates, the average result for donations and foundations in the fiscal year ended June 30 was 7.8%, the worst performance since 2009. venture capital and private equity estimates fully reflected the deep downturn in public markets, the potential impact on future results.

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The explosive growth in venture capital revenues led to an increase in the income of large donations in the previous year, which led to the emergence of many expanded financial assistance initiatives and other programs, despite the fact that some of the income remained unrealized.

Donations also help fund faculty salaries and capital projects. “If this continues for another year, there will be consequences,” said Margaret Chen, global head of the Cambridge Endowment and Foundation Practice.

However, she said the funds were protected from bigger losses by diversifying their portfolios, which often include hedge funds, real estate, private loans and cash in addition to public and private investments and fixed income. A benchmark portfolio of 70% global equities and 30% Bloomberg Aggregate bond index lost 13.8% over the period, according to Cambridge data.


Many schools’ use of a “smoothing formula” to determine the distribution of their donations to their budget has limited the impact of losses, said Greg Dowling, investment director of Cincinnati, Ohio, an investment advisor to the Fund Evaluation Group. Such formulas typically take into account several factors, including the average market value of donations over three years or more, to mitigate the effect of performance fluctuations.

Public and private equity markets have retreated as central banks around the world are raising interest rates in the face of rising inflation. The S&P 500, Nasdaq Composite and MSCI ACWI indexes lost 10.6%, 23.4% and 15.4% respectively, including dividends, for the year ended June 30, their biggest losses in more than a decade, according to Dow data. Jones Market Data.

Oil and gas, a rare bright spot in markets that have skyrocketed since Russia invaded Ukraine, has done little to boost donation income. In recent years, numerous donations have adopted divestment policies amid efforts to combat climate change, limiting their impact.

The only exception was Princeton University, whose donations have benefited from involvement in fossil fuel companies, people familiar with the matter say. In September, Princeton said it would get rid of state-owned fossil fuel companies, as well as thermal coal and tar sands companies. The university has not approached its other private oil and gas holdings. Giving lost 1.5% in the fiscal year ended June after rising 46.9% the previous year to $35.8 billion as of June 30.

Endowment investments in venture capital have proved particularly thorny.

Private companies have postponed initial public offerings and laid off employees. Some, including Instacart Inc. and Klarna Bank AB have lowered their estimates.

But valuations remain relatively high overall as managers wait for events like new funding rounds or public offerings to reprice their private investments.

“A venture is like a mile-long train, and there was an accident at the very beginning of the train. It will take some time to get the hang of it,” said Matt Bank, partner at Charlotte, NC, Global Endowment Management, an outsourced investment office that manages $12 billion for clients, including donations.

Harvard fund chief NP “Narv” Narvekar suggested that VCs have underrecorded their private investments, saying in his annual letter this month that the funds’ performance largely reflects their exposure to the public markets. The lack of write-downs “makes us cautious about projected returns on private portfolios,” he wrote.

The Harvard Foundation, which is less active in venture capital investments than some of its peers, lost 1.8% in the fiscal year ending June after rising 33.6% a year earlier. As of June 30, donations totaled $50.9 billion.

Differences in how schools report the performance of their private investments make it extremely difficult to compare returns, fund managers and advisers say. While some have included lagging returns for the year to March 31—generally capitalizing on early gains and the sell-off in the public markets that occurred in earlier periods—others have included private returns for the year to June 30.

Letters from many philanthropists provided little detail on how they navigate the changed investment environment. One of the most revealing reports came earlier this year, in a March letter from the president of MIT Investment Co. Seth Alexander, who wrote that in recent years, there has been growing concern about the fund’s exposure to “profit tomorrow” risk. MIT donations rose to $27.4 billion as of June 30, 2021, from $18.4 billion a year earlier.

He wrote that to overcome the volatility caused by valuation fluctuations and to avoid a sell-off of assets to finance short-term needs, the fund kept cash, undertook smaller liabilities on illiquid funds, and kept a “small portfolio” of hedging.


“We suspect that this balance between investing capital in new areas of innovation and being on the defensive to weather the downturn will be one of our biggest challenges in the coming years,” Mr. Alexander wrote.