As a continuation of an overview of the endowment plans of the Ivy League (‘the Ivies’), this piece will focus on their real estate investments and allocations, and compare their exposure to the real estate sector against recent years.
Assets under Management
As at the start of Q4 2017, the Ivies held $117bn in assets under management (AUM) collectively; this represents 15.7% of the total global AUM of endowment plans tracked on Preqin’s Real Estate Online, despite accounting for only 1.5% of the number of these institutions worldwide. When examining their allocation to the real estate asset class, only half of the Ivies are within the top 25 endowment plans globally, with a collective $8.5bn allocation to the asset class as at Q4 2017.
Allocation to Real Estate
On average, the Ivies have a current allocation of 7.9% of total assets to real estate, with an average capital allocation of $1.4bn. This is significantly higher than the average allocation figures of the global endowment plan universe (6.9% of total assets, accounting for $121mn); however, with a current allocation of $6.7bn, Stanford Management Company remains the largest allocator to real estate among all endowment plans worldwide.
Largest Percentage Allocations (% of AUM)
- All endowment plans: University of Surrey Foundation (96%)
- Ivy League endowment plans: Yale University Endowment (13%)
Largest Capital Allocations
- All endowment plans: Stanford Management Company ($6.7bn)
- Ivy League endowment plans: Harvard Management Company ($3.6bn)
Changes in Allocations
According to the Preqin Investor Outlook: Alternative Assets, H2 2017, the real estate asset class was one of the most consistent performers across alternatives: 95% of investors interviewed by Preqin in June 2017 felt their real estate investments over the previous 12 months had met or exceeded their expectations.
Despite the overall favourability of the asset class among many investors, the Ivies have steadily reduced their exposure to the asset class since 2013. Yale University shows the largest percentage drop: in 2013, its real estate allocation stood at 20.2% of total assets, seven percentage points higher than its current 13.0%. Dartmouth College Endowment has almost halved its allocation in the same period, from 9.9% to 5.8%. The same trend appears in their target allocations: Cornell University Endowment, Dartmouth, University of Pennsylvania Endowment and Yale University Endowment all decreased their targeted allocation from 2013 to 2017 in order to have less illiquid investments, and to focus on more market-insensitive assets.
In terms of the actual capital within the asset class, it would appear that real estate is one of the steadier investments in these institutions’ portfolios: the Ivies currently allocate $8.5bn collectively to the asset class, up from $8.0bn in 2013. However, in August 2017, Harvard Management Company sold approximately $2bn of its real estate fund stakes to Landmark Partners and Metropolitan Real Estate Equity Management, as part of the endowment plan’s strategic revamp overseen by newly appointed CEO N. P. Narvekar.
Despite Harvard conducting a significant shift in its real estate holdings, collectively, the Ivies seem committed to the asset class: Princeton and Dartmouth are both planning to invest opportunistically in the real estate market over the next 12 months.