(Bloomberg) -- Princeton University’s $34.1 billion endowment is bringing up the rear in investment returns among Ivy League peers for the second straight year.
The fund recorded a 3.9% gain during the year ended in June, Princeton said in a statement Thursday. That’s the lowest so far in the Ivies, with only Yale University yet to report results. Princeton’s endowment, which distributed $1.7 billion for the school’s operations, held steady in value over the year.
Princeton and many of its wealthy peers have moved away from US stocks while increasing bets on alternative assets such as private equity and hedge funds, seeking diversification and a premium for illiquid long-term investments. As a result, they’ve mostly missed out on a recent stock rally, with the S&P 500 index surging 23% during the 12 months ending June 30.
Over time, private equity has helped Princeton generate big gains, including a 47% overall return in 2021. But the asset class has lagged behind more recently. It accounted for 40% of the endowment’s holdings as of June 2023. The New Jersey school has yet to release a breakdown by asset class for this year.
Princeton, the richest college in terms of endowment per student, is heavily reliant on the fund. It provides about two-thirds of the school’s net annual operating revenues, up from about one third in 1997. In the current freshman class, about 72% of students qualified for financial aid.
“The endowment allows us to offer unparalleled financial support to our students, launch major research initiatives and build state-of-the-art facilities,” Provost Jennifer Rexford said in the statement.
The University of Pennsylvania had the second-lowest return in the eight-member Ivy League so far, with a 7.1% gain. Columbia University led the group with 11.5%. Harvard University’s fund, the largest in US higher education, returned 9.6%.
More broadly among American colleges, one of the best performances came from Michigan State University with a 15% return, thanks in part to strong gains from public equities.
US college endowments earned a median return of 10.6% before fees during the same period, according to Wilshire Trust Universe Comparison Service, which doesn’t name individual schools.
Smaller funds, which typically have higher exposure to US stocks, performed better, according to Wilshire. The median return of endowments with less than $500 million was about 11%, compared with 9.1% for funds with more than $500 million.
Princeton’s endowment had been run by Andrew Golden since 1995. He retired earlier this year, succeeded by Vincent Tuohey, who came from the Massachusetts Institute of Technology.
--With assistance from Jack Witzig.
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