First Endowment Study to Highlight 58 Years of Endowment Underperformance

  • The average endowment could have significantly improved its performance by simply replicating a 60/40 passive benchmark strategy

BOSTON, MA / ACCESSWIRE / August 3, 2020 / Veriti Management LLC (“Veriti”), a registered investment adviser (RIA) and a leading provider of direct indexing technology serving institutions and advisors announced today that, Dennis Hammond, head of institutional and responsible investments at Veriti published, “A Better Approach to Systematic Outperformance? 58 Years of Endowment Performance,” in the August 2020 issue of The Journal of Investing.

The study is the first to cover the entire 58-fiscal-year period ending June 2019, (the longest time frame currently available), and uses the National Association of College and University Business Officers (NACUBO) compendium of annual endowment data, extending back to July 1961. This study was undertaken to determine whether endowments met various return goals over time, and whether those returns on average could be systematically improved.

Commenting on the findings, Dennis Hammond, head of Institutional Investments at Veriti Management stated, “Over the 58-year period researched, the average endowment significantly underperformed its annual return need, its typical long-term return objective, and the traditional 60/40 passive benchmark. Additionally, while the largest cohort of endowments managed to match the return of the passive 60/40 benchmark over the full period, they underperformed during the most recent 10-year period by 1.5%, or an eye catching 150 basis points annually.”

Hammond continued, “The fact that the average endowment has failed to meet both its internal goals and the traditional 60/40 external benchmark in so many extended periods – both recently and over the long-term – should be a serious cause for concern for most trustees, and their stakeholders.”

“Over the past decade, mounting pressures on budgets, historically high equity valuations and increasingly low bond yields, have influenced many endowments to increase their exposures to alternative investments such as private equity, private real estate and hedge funds in an attempt to improve returns. Our research findings confirm, and we passionately believe, that rather than shifting allocations to sometimes riskier, and more expensive alternative investments, the average endowment, and especially the smaller endowments, would have significantly improved performance and been better served by simply replicating passive benchmarks,” concluded Hammond.

“We believe these findings are particularly alarming in light of the present predicament for colleges and universities, added Jim Dilworth, managing partner and co-founder of Veriti Management. “COVID concerns will certainly restrict the normal income of most higher education facilities going forward, and potentially in significant ways, ranging from reductions in tuition, room and board, sports franchise revenue streams including the value of ongoing media rights.

“Beyond the sobering underperformance highlighted in this study, we believe that chronic overspending of university budgets during the past 58-years may combine to present an existential risk for many endowments, if left unabated,” Dilworth concluded.

At the end of fiscal 2019, the National Association of College and University Business Officers compendium of annual endowment data showed that the 774 reporting endowments held more than $600 billion of assets. The average endowment asset size was around $800 million, though the median asset size was only $144 million. The following is a summary of key points from the August 2020 research paper published in the Journal of Investing.

  • Over the 58-year period data are available, the average endowment significantly underperformed its annual return need, its typical long-term return objective, and the traditional 60/40 passive benchmark.
  • Over the 58-year period, the average endowment return had compounded 2.1% below the long-term return objective. On an annual basis, over the shorter, most recent 46-year period, endowments underperformed the long-term return objective by 0.7% annually.
  • Over the fiscal years 2009-2018, the average endowment failed to earn its long-term return objective in even a single year. During this same 10-year period of endowment underperformance, the long-term annual return objective for the average endowment was reduced from 10% to 7.1%.
  • Relative to the average endowment, the traditional 60/40 US stock/bond mix provided superior absolute and risk-adjusted returns over the 58-year period by 1% annually (a figure that closely approximates the difference between the costs of active versus passive strategies).
  • The only period in which the average endowment return outperformed the 60/40 mix was the trailing 20-year period, in which it outperformed (on a gross basis) by 50 basis points annualized. The average endowment return underperformed the 60/40 benchmark in each of the last 58, 50, 40, 30, and 10-year periods.
  • The largest cohort of endowments outperformed both the average and the smallest cohort. This could be the result of largest cohort’s access to superior managers, the increased ability to negotiate lower fees, or a combination of both.

Mr. Dennis Hammond has served as an endowment consultant for nearly forty years, and is perhaps best known in his 25-year role as CEO and founder of Hammond Associates Institutional Fund Consultants, the second largest institutional consulting firm to Higher Education clients in America, before it was acquired by Mercer Consulting.

In his role at Veriti Management, Dennis helps institutional clients create responsible portfolios customized to their specific preferences and values. These factors include faith-based, corporate environmental, social, or governance (ESG), and UN Sustainable Development Goals (SDGs). Dennis’s focus is to help each client find the optimal blend of financial and personal return from their portfolios. Dennis earned his Master of Law (LLM) in Tax from Washington University Law School, a Law degree (JD) from Villanova University Law School, and his B.A. in English from the University of Kansas. Dennis also serves on the board of the New Life Children’s Home based in Port au Prince, Haiti.

About Veriti Management

Veriti Management is an investment adviser registered with the U.S. Securities and Exchange Commission based in Boston Massachusetts. Veriti aspires to change how people visualize investing, focusing on the greater good. We deliver fully customized, tax-efficient, consciously aligned portfolios at a low cost. Veriti’s Direct Indexing technology offers substantial tax benefits and the ability for investors to align their portfolios with their values. This single tool is powerful, versatile, personalized, and built to do good. For more information please visit,

Veriti Management Contact:

100 High Street, Suite 1110
Boston, MA 02110

Media Inquiries Contact::
Bill Conboy

Disclosure: Veriti Management LLC (Veriti) is an investment adviser registered with the US Securities and Exchange Commission. Such registration does not imply endorsement, or a certain level of skill or training, and no inference to the contrary should be made. Veriti, its strategies, and further disclosures are described in more detail in Part 2 of Veriti’s current Form ADV, which is available upon request. The strategies and/or investments referenced may not be suitable for all investors because the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Every investment in securities presents the risk of financial loss as well as gain. The information contained in this report (including market values and other data) is from sources believed to be reliable. We cannot guarantee the accuracy or completeness of such information and we assume no liability for damages resulting from or arising out of the use of such information. For more information please visit our website at

SOURCE: Veriti Management

View source version on

error: Content is protected !!