Cambridge University’s £3bn (€3.4bn) endowment fund (CUEF) posted an 18.8% investment return for the 12 months to 30 June 2017 – almost three times its return for the previous 12-month period.
The fund, managed by the university’s investment office, gained 6.3% in the 12 months to 30 June 2016. Over five years to the end of June last year, it has generated an annualised return of 13.8%.
In his report, Professor Duncan Maskell, senior pro-vice-chancellor at Cambridge University, said: “Despite a steady fall in broad market volatility, an increase in the dispersion of individual stock returns in the second half of the year favoured active management, and the CUEF benefited from the outperformance of its equity and hedge fund managers compared to their benchmarks.”
He added: “There were strong performances in private investments and direct property assets. Over the year the overall conditions were benign, continuing to favour equities over other asset classes, but also caused few investments to be objectively cheap relative to their histories.”
At end-June 2017, CUEF’s portfolio was invested 59% in public equities, 13% in private investments, and 12% each in absolute return investments and real assets.
Some long-term investments were held outside CUEF, including certain investment properties in Cambridge and equity investments in spin-out companies overseen by the university’s technology transfer company Cambridge Enterprise.
CUEF finances university posts and activities, with several colleges also as investors.
Oxford ups public and private equity exposures
Meanwhile, Oxford University’s Endowment Fund (OEF) reported a 9.2% investment return for the 2017 calendar year.
This compared with a 2016 return of 16.4%, which was due in part to a flexible currency strategy benefited from sterling’s movements after the EU referendum in June 2016.
The £2.6bn pooled fund – run on behalf of Oxford University and a number of individual colleges – has returned 11.7% a year on average over the past five years.
OEF said the most significant change in 2017 was the increase in exposure to public equity at the expense of cash. It invested an additional 6.3% of its portfolio into listed equity managers in early 2017, finishing the year an allocation of 53.2%.
OEF’s public equity managers gained 14.5% annualised over the past five years.
In 2017, OEF’s bias towards sectors with the highest potential returns led to considerable investment in consumer franchises in both developed and developing markets, the fund reported.
However, it said it had seen less opportunity for growth in more mature, capital intensive and heavily regulated sectors such as energy.
At 31 December 2017, the portfolio had a 1.4% exposure to energy exploration and extraction with a further 1.3% in energy-related sectors – much lower than energy’s natural weighting in equity markets.
During 2017, OEF continued to commit to private equity – 23.6% of the portfolio at end-2017 – concentrating on growth equity, niche sector strategies and venture investments, and backing some new groups raising their first funds in the US, UK and China. The private equity portfolio returned 18.6% annualised over the past five years.
The endowment’s credit exposure – 8.6% of the portfolio – includes investments in direct lending and complex special situation strategies in the US, Europe and Asia.
Within its property holdings – 5.9% of the total – OEF said it had built a solid portfolio of UK commercial and residential properties to complement its holdings in strategic land and rural estates.
Together with the £500m Oxford Capital Fund, which provides expendable capital over the medium term, typically for building projects, OEF is run by Oxford University Endowment Management, a wholly-owned subsidiary of the university.
OEF’s investment objective is to grow its capital by an average of 5% a year in real terms, at a lower volatility than experienced by investing solely in the public equity markets.