TY - JOUR T1 - Endowment Performance JF - The Journal of Investing DO - 10.3905/joi.2021.1.166 SP - joi.2021.1.166 AU - Richard M. Ennis Y1 - 2021/02/06 UR - https://pm-research.com/content/early/2021/02/06/joi.2021.1.166.abstract N2 - Endowment funds in the US, large and small, significantly underperform passive investment. Moreover, an analysis of the performance of 43 of the largest individual endowments over the 11 years ended June 30, 2019, reveals that none outperformed with statistical significance, while one in four underperformed with statistical significance. Alternative asset classes have failed to deliver diversification benefits and have had an adverse effect on endowment performance. Given prevailing diversification patterns and costs of 1% to 2% of assets, it is likely that the great majority of endowment funds will continue to underperform in the years ahead.TOPICS: Foundations & endowments, real assets/alternative investments/private equity, mutual funds/passive investing/indexing, performance measurementKey Findings▪ Endowment funds in the US consistently underperform passive investment across cohorts of fund size. Significant underperformance is also observed in cross-sectional analysis of the returns of the largest individual endowment funds.▪ Alternative investments have failed to provide diversification benefits post–global financial crisis and have been a drag on endowment performance.▪ Given prevailing diversification patterns, endowments’ investment expenditures of 1%–2% of asset value simply overwhelm the opportunity to exploit asset mispricing. ER -