PE, VC Post Big Gains for Endowments in Fiscal 2011

Endowments saw very nice double-digit returns from venture capital and private equity investments in fiscal 2011. But those gains still lagged returns from public equities.

Those were some findings from a study released Tuesday by the National Association of College and University Business Officers (NACUBO) and Commonfund, based on data from 823 U.S. colleges and universities.

The data show that, overall, institutions’ endowments returned an average of 19.2% (net of fees) for the 2011 fiscal year, which ended on June 30. This represents a marked improvement over the average 11.9% return reported for fiscal 2010 and a continuation of the recovery from the -18.7% return reported for fiscal 2009.

Compared to overall returns, private equity performance was pretty respectable, and venture capital was actually quite strong. For all of fiscal 2011, private equity returns were 18.7%, while venture capital returned 21.7%.

However, neither venture nor private equity could hold a candle to the public markets. According to NACUBO, the category with the highest returns in 2011 was domestic equities, which gained 30.1%, nearly doubling fiscal 2010’s 15.6% return.

The study’s authors however, aren’t confident the big gains will hold. NACUBO President and Chief Executive Officer John D. Walda and Commonfund Institute Executive Director John S. Griswold said in a joint statement that: “We should note that fiscal 2011 closed before equity markets encountered headwinds and high volatility beginning in July 2011 caused by concerns about the debt crisis in Europe, the stubbornly high U.S. unemployment rate, and muchslower growth in the U.S. economy. Endowments very certainly were stressed by these factors during the latter part of calendar year 2011.”