According to the 2019 NACUBO-TIAA Study of Endowments, the median targeted hurdle rate for large endowments in 2019 was 7.5%. But the median actual return for these investors was just 5.5%.
Nathan Shetty, Nuveen’s head of multi-asset portfolio management, looks at how endowments and foundations can optimize their approaches to portfolio construction and begin to bridge the gap, between their targeted hurdle rates and expected investment returns in a low-rate environment.
Using the results from the 2019 NACUBO-TIAA Study of Endowments as a starting point, Nathan shares his views on:
- Reassessing expected returns given today’s capital markets assumptions
- Deploying active risk more efficiently to address the shortfall
- Taking a more holistic approach to illiquidity and rebalancing
- Turning ESG policies into actionable investment strategies
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ABOUT THE 2019 NACUBO-TIAA STUDY OF ENDOWMENTS:
The annual report analyzes the financial, investment and governance policies and practices of the nation’s endowed institutions for higher education. The 2019 report reflects the responses of 774 institutions representing $630.5 billion in endowment assets, including 189 institutions that have at least $500 million in endowment assets. For the purposes of this paper, we focus on the survey results reported by these large institutions.