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Public Pensions Struggle as Real Estate Investments Underperform in Recent Years
Public pensions are facing challenges as real estate investments have underperformed, mirroring issues seen in venture capital for endowments. Many state plans, particularly in Connecticut, New Jersey, Washington, and Arizona, have struggled to meet benchmarks due to high real estate exposure, prompting a reevaluation of strategies. As private real estate continues to decline, pensions are shifting focus towards sectors with stronger fundamentals, such as industrial and multifamily properties, while moving away from distressed office and retail assets.
Investors Shift Focus to Bonds Amid Rising Yields and Inflation Concerns
Investors are increasingly looking to boost their bond allocations, with 99% planning to increase exposure within 18 months, driven by attractive yields and the need for strategic rebalancing. A survey shows 57% view their portfolios as underweight in fixed income, prompting shifts from equities to bonds to mitigate risks and realize gains. Experts emphasize the importance of reassessing asset allocation strategies in light of current market conditions, suggesting diversification into inflation-linked bonds and other assets to address future challenges.
Harvard's $53.2 billion endowment achieved a 9.6% return in fiscal year 2024, driven by strategic manager selection and significant shifts in asset allocation. The endowment reduced real estate and natural resources exposure while increasing private equity and hedge fund allocations, with technology stocks contributing to the strong performance. Despite private equity underperforming relative to public markets, the overall results positioned Harvard favorably among Ivy League peers.
columbia university endowment achieves 11.5 percent return driven by public markets
Columbia University’s endowment achieved an 11.5% return for the fiscal year ending June 30, growing its value to $14.8 billion, driven by strong public markets and positive private asset performance. While private assets lagged, the endowment's domestic equity exposure was notably high, contributing to its success compared to peers. Columbia outperformed Dartmouth and several other universities but fell short of the University of Minnesota Foundation's 13.4% return.
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