E&Fs benefit from buoyant US equity market
18 April 2018 New York
Image: Shutterstock
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."
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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