(Bloomberg) — Soaring returns at venture capital funds juiced results across U.S. university endowments, propelling one investment for Michigan State University’s $3.9 billion fund to an eye-popping 1,000% gain.
Universities saw their endowments swell by billions of dollars after a year which by one estimate could be the sector’s best since the mid-1980s. Powered by specific pandemic-related gains and a macro environment that’s been a boon to private investment funds, colleges are reaping returns that may not be seen again for a generation.
“There will probably be nothing like this in our lifetime,” said James Clarke, senior vice president of investments and treasurer of the Kansas University Endowment Association. “It almost felt like 2021 was the realization of the promises we were made about the internet 20 years ago — we spent our lives doing virtual meetings on Zoom with products delivered to our door and unlimited Netflix.”
About 30 venture funds that Kansas has invested in posted triple-digit gains, he said.
Surging Returns
Equities have been surging in recent years in part due to historically low interest rates pushing investors into higher-yielding options. At the same time, venture funds have benefited from a growing number of companies staying private for longer, as well as more money chasing the next big thing.
Venture’s focus on tech companies has also helped, as the pandemic accelerated technology trends such as remote work.
“It resulted in an accelerated adoption of online services, which a lot of people expect will continue,” said Anders Hall, chief investment officer of Vanderbilt University, which saw a 57% return. “Trends that were going to happen anyway, but happened more quickly.”
There were also gains more directly tied to the Covid-19 pandemic. The 65% return at Washington University in St. Louis through June 30 was helped by a co-investment in vaccine-developer Moderna Inc., which rose about 280% in the period.
The school’s global equity portfolio gained 71.5% and its buyout, venture capital, distressed debt and growth equity investments advanced 82%, said CIO Scott Wilson.
At Michigan State, which saw its endowment return 41%, some of the biggest growth came from investments in fintech such as blockchain, and other technology including services that support online payments, said CIO Phil Zecher.
“Our whole private investment portfolio did extraordinarily well with venture up over 100%,” he said.
Some of the performance is unrealized gains, said Hall of Vanderbilt, where returns boosted its fund to $10.9 billion. Venture funds won’t actually deliver the gains until they can exit the investments, usually through initial public offerings. Even then, some firms continue to hold onto public companies, such as Airbnb Inc. and DoorDash Inc., said Hall. He declined to comment about specifics in the school’s portfolio.
“The positions in the companies themselves are so big it’s going to take a lot time to unwind these,” said Allen Huang, director of investments at Michigan State. “There’s a lot of volatility in those prices when they’ve finally liquidated and returned to limited partners, the endowments, they could be less.”The endowment of Bowdoin College, a liberal arts college in Maine, returned 57%, boosting its value to $2.7 billion, said Clayton Rose, the school’s president. Public markets created a tailwind and many of the investments that performed well were made years ago, he said. He didn’t provide details.
Bowdoin was also helped by the fact that it had liquidity in the endowment during the worst of the pandemic and didn’t need to sell anything at the bottom of the market “in a distressed way that we would regret later,” said Rose, a former banker and Harvard Business School professor.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
