From Financial News London, February 15:
A crowded field and subpar returns have frustrated America’s wealthiest universities, some of private-capital firms’ most-loyal clients
Private equity is on academic probation.
Princeton University is lowering expectations for its endowment’s returns because its private-capital investments have disappointed. Yale trimmed its portfolio of leveraged buyouts for the first time in a decade. Harvard says cashing out of some private-market investments early is now part of a long-term strategy.
Private equity has counted America’s wealthiest universities among its largest and most-loyal clients since the industry’s formative years. But the market for private-company investments has turned more crowded, and returns now struggle to match broader stock-market benchmarks such as the S&P 500.
University endowments grew to lean on the once-juicy returns of private equity to cover a larger slice of their overall budget. That strategy faltered when the long lockup investments returned an annualized 7.4% in the three years ended June 30, according to Cambridge Associates—much of it paper gains. Over that same period, the S&P 500 rose 19.7% a year.
It was a terrible time for the Ivy League’s golden goose to stop laying eggs. The Trump administration’s decision to revoke federal funding rippled through their campuses, forcing cuts on research projects and leaving schools scrambling. Settlements and court orders have since restored much of that money. But beginning next fiscal year, some of the richest schools expect to pay hundreds of millions of dollars annually in additional taxes on endowment income.
“They are looking at their underperforming private-equity portfolios, which for 30 years were supposedly the gold standard, and they’re worried,” said Charles Skorina, a recruiter in university investment management....
....MUCH MORE
Also at fnLondon, BigLaw Feb. 12:
Kirkland & Ellis scraps 24-hour concierge service
