Look out Ivies, there’s a new foundation artist in town.
Baylor University’s $2 billion endowment – a fraction of the Ivy League’s funding – returned 6.4% in the fiscal year that ended June 30, outperforming the entire conference. Harvard’s endowment, the largest at $50.7 billion, returned 2.9%.
Additionally, with an annual return of 10.9% over the past five years, Baylor outperformed all Ivy League colleges except Brown University, which posted a return of 13.3% over the same period, according to the Wall Street Journal. Brown’s endowment was more than three times larger than Baylor’s at $6.6 billion in fiscal year 2023.
The key to Baylor’s endowment success is taking advantage of market dislocations, according to David Morehead, chief investment officer.
“It’s really driven by the managers, and then if we see a dislocation on the sidelines, we could put more money into high-yield bonds.” [emerging markets] — something like that,” the former trader said on CNBC’s “Halftime Report” last week. “We really are allocators.”
Morehead joined the university in 2011 and since the 2012 fiscal year, Baylor’s endowment has more than doubled.
This increase is due to the fact that the return on capital has increased again across the country. Endowment returns increased 7.7% in fiscal year 2023, according to the latest study from the National Association of College and University Business Officers and Commonfund. In contrast, returns fell 8% in fiscal 2022.
However, the recent increase is still below fiscal 2021 returns, which stood at 30.6%. This is the second highest average return ever recorded since the NACUBO study began in 1974. The highest return in the study to date was achieved in the 1983 financial year at 41.3%.
Morehead said he and his four-person investment team focus on the liquidity of their portfolio as part of their strategy. He explains that assessing these needs in advance allows the team to take advantage of market dislocations as they arise.
In a statement to CNBC, Morehead noted that initial allocations into or out of a market segment are triggered by a move of 20% or more in one direction or the other.
“We don’t care if the market goes up or down 1-2% in a day – we are long-term investors,” he said in the statement.
He also revealed to CNBC that his team is also betting on helium in the medium term in addition to biotech and small caps.
The raw material, used in chip manufacturing and rocket launches, has faced supply shortages in recent years. With the semiconductor industry growing and rocket launches at an all-time high, Morehead predicts demand will continue to grow and helium prices will rise.
“Our broader expectation is that the big tech companies will start developing their own chips to avoid being beholden to them Nvidia going into the future,” he added.
Source link
2024-02-27 23:07:17
www.cnbc.com
