University of Illinois Foundation notches net -8% annual return

University of Illinois Foundation's $2.4 billion endowment pool returned a net -8% for the fiscal year ended June 30.

The endowment's return finished above the return of -15.4% by a benchmark of 60% MSCI All Country World index and 40% global fixed income, according to a webcast of the Urbana-based foundation's annual business meeting on Friday.

For the three, five and 10 years ended June 30, the endowment pool returned an annualized net 7%, 6.4% and 7.5%, respectively, above the respective benchmarks of 4.3%, 2.2% and 2.9%.

The endowment pool had returned a net 33.9% for the fiscal year ended June 30, 2021.

In the webcast, Travis Shore, the foundation's chief investment officer, cited the difficult market environment for public equities and fixed income for the endowment pool's negative performance for the most recent fiscal year.

For the year ended June 30, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned -13.9% and -10.3%, respectively, in sharp contrast to returns of 44.2% and 4.6% for the year ended June 30, 2021.

"There really wasn't anywhere to hide, so all things considered, -8% is not such a bad outcome," Mr. Shore said in the webcast.

The endowment's return was the lowest among the 27 university endowments whose latest fiscal-year returns have been tracked by Pensions & Investments through Friday. The median return among those endowments is currently -3.1%.

While Mr. Shore did not disclose returns by asset classes at the annual meeting, a news release from the foundation on Friday said private equity had the highest preliminary return for the period, outperforming its benchmark of 11.6%.

However, the endowment's target allocation to private equity is 10%, well below the targets of 53% to public equities and 25% to fixed income. The endowment pool also has a target of 12% to real assets.

Mr. Shore joined the foundation as CIO in April from Vanderbilt University, Nashville, Tenn., where he served as deputy CIO in its investment office overseeing its $10.9 billion endowment.

In the Friday webcast, addressing the foundation's investment philosophy, he said, "We believe in active management. We believe you can add value through investing in operating businesses that can internally reinvest and compound capital over time. So, we are business-focused and equity-focused in managing the endowment."

Mr. Shore added that he has spoken to the foundation's investment policy committee and the board about the concept of what he calls "flipping the funnel."

"The idea is that the best investments in the world, they don't find us in our offices in Chicago, they don't land in our inbox," Mr. Shore said. "We have to go out and find them, so we're working to develop outbound and thesis-driven ways of sourcing our investments on a global basis and putting in all the research up front to find where those are."