E&Fs benefit from buoyant US equity market 18 April 2018New York Reporter: Jenna Lomax
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Small and large endowments and foundations (E&Fs) experienced a 14.57 percent one-year average return due to the bull market, according to a Asset Strategy View report by BNY Mellon.
In its report, BNY Mellon suggested that the buoyant US equity markets benefit E&Fs.
BNY found larger institutions outperformed smaller institutions by just over 1 percent in nearly every sub-asset class.
Larger E&F funds invested more heavily in alternative investments such as hedge funds and private equity asset classes.
Institutions with less than $1 billion in assets experienced strong annual returns of 14.15 percent compared to those with more than $1 billion in assets at 15.2 percent.
The report showed that over the last five years, smaller E&Fs increased exposures to fixed income increased 21 percent, while equities increased by 8 percent while lowering exposures to alternatives decreased by 15, particularly within private equity and real estate.
Larger E&Fs have tended to maintain exposures to alternatives (+5 percent) and equity (+1 percent), while significantly reducing their holdings in fixed income by 32 percent.
Frances Barney, CFA, and head of global risk solutions at BNY, said: “Institutions with smaller asset bases tend to have fewer in-house investment professionals, that can sometimes make it more difficult for them to access alternative investment options that are leveraged by larger endowments and foundations."
Barney added: "While endowments and foundations of all sizes experienced strong performance in 2017, they seem to have a shared concern about increased market volatility, evolving tax and regulatory reform, and anticipated interest rate increases in 2018."
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