The endowment funds of universities in the Asia Pacific fared relatively well in the global financial crisis (GFC), although further asset allocation to alternative investments could help boost returns, according to research conducted by Mercer.
During the GFC, Asia Pacific endowment funds performed better than their United States counterparts, Mercer’s Asia Pacific University Investment Survey found.
The research indicated that by 30 June 2009, a lower allocation to sharemarkets and hedge funds, together with a bias to the better performing Australian sharemarket, saw local university funds post a loss of 6.4 per cent, compared to -18.7 per cent in the US.
The research findings indicated this trend also held true over a period of five years, with an average return of 6.9 per cent per annum for Asia Pacific funds and 2.7 per cent per annum for US funds.
“The university endowment funds in the Asia Pacific have performed relatively well in a challenging market,” Mercer Investment Consulting business leader for Asia Pacific Simon Eagleton said.
“Those who participated in the survey all have formal investment strategies and sound governance structures, which may have assisted them in dealing with the extremes in capital market volatility experienced in the worst of the GFC.”
However, the survey findings also indicated that some universities could benefit from greater diversification.
“Spreading risk across asset classes stands out as an area in which Asia Pacific universities could further improve their investment strategies,” Eagleton said.
“The larger university portfolios are well on their way down this path but those of more modest sizes need to continue to make efforts to diversify their sources of return and risk in their portfolios.
“Some institutions indicated they are looking to outsource aspects of their investment arrangements as one way to achieve this.”
