Hedging endowments – Gains for alternative funds

The University of Washington, Smith College and Mount Holyoke College are considering or moving to boost their endowments’ investment in hedge funds, Dow Jones Newswires reported April 20.

The University of Washington said it might increase its stake in hedge funds to 15 percent of its $1.2 billion endowment, up from 10.5 percent at the end of 2000.

Smith College is investing up to 25 percent of its $900 million endowment in alternative investments, with up to 10 percent in hedge funds over the next few months and the rest in private equity and venture capital by the end of the year.

Smith hired Jay Yoder as director of investments in August after he increased alternative investments in the endowment at Vassar College to 25 percent during his six years there.

Mount Holyoke, which as of late February had 8 percent of its $430 million invested in three funds, also is considering a new hedge-fund investment, and aims to increase its hedge-fund investments to 10 percent, Dow Jones Newswires said,

Two recent studies indicate a trend toward greater investment of endowments in hedge funds.

Hedge funds were the most popular choice among colleges and universities for alternative investments, according to a study by the Commonfund Institute found that

And in the fiscal year ended June 30, the largest endowments in the U.S. – of $1 billion or more – posted an average return of 29.2 percent, thanks mainly to alternative investments, according to a study by the National Association of College and University Business Officers.

Endowments of $500 million to $1 billion retuned an average of 18.8 percent.

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