Look out, Ivy Leaguers, there’s a new endowment performer in town.
Baylor’s $2 billion endowment, a fraction of the Ivy League’s endowments, generated a 6.4% return in the fiscal year that ended June 30, beating the return for the entire conference. Harvard University has the largest endowment at $50.7 billion, with a return rate of 2.9%.
What’s more, Baylor’s annualized return over the past five years is 10.9%, beating every Ivy League school except Brown, which returned 13.3% over the same period. wall street journal. Brown University’s endowment for fiscal year 2023 is $6.6 billion, more than three times that of Baylor University.
Chief Investment Officer David Morehead said the key to Baylor’s endowment’s success is taking advantage of market dislocations.
“It’s really driven by managers, and then if we’re on the edge and see… a dislocation, we can allocate more money to high-yield bonds, move more money to high-yield bonds,” the former trader said. Allocation to (Emerging Markets) — something like that.” CNBC’s “Halftime Report” last week. “We are really allocators.”
Morehead joined the university in 2011, and Baylor’s endowment has more than doubled since fiscal 2012.
The increase comes as donation returns rebound nationwide. Return on donations increased 7.7% based on fiscal year 2023 data Latest research from the National Association of College Business Officers and Commonfund. In comparison, returns fell 8% in fiscal 2022.
However, the latest gain is still below the 30.6% return in fiscal 2021. This is the second-highest average return on record since the NACUBO study began in 1974. The study’s highest return to date occurred in fiscal 1983, at 41.3%.
Morehead said he and his four-other investment team will focus on portfolio liquidity as part of their strategy. He explained that assessing these needs ahead of time allows the team to take advantage of market disruptions when they occur.
In a statement to CNBC, Morehead noted that initial allocations to enter or exit a market segment are triggered by a move of 20% or more in either direction.
“We don’t care at all if the market goes up or down 1-2% in a day, we are long-term investors,” he said in a statement.
He also revealed to CNBC that his team is betting on helium, biotech and small-cap stocks in the medium term.
The commodity, used in chip manufacturing and rocket launches, has faced supply shortages in recent years. With the semiconductor industry growing and rocket launches hitting record numbers, Morehead predicts demand will continue to rise, pushing up helium prices.
“Our broader expectation is that major technology companies will start developing their own chips to avoid being restricted by Nvidia Keep going,” he added.
