An overallocation to venture capital and emerging markets and a lack of sufficient exposure to surging tech stocks drove down Princeton’s endowment returns.
The New Jersey-based university’s $34.1 billion endowment returned 3.9 percent for the fiscal year ending June 30, well below its Ivy League peers. Princeton’s return is the lowest among Ivy League and other elite endowments tracked by Markov Processes International. By comparison, Harvard’s endowment returned nearly 10 percent, while Columbia and Brown each exceeded 11 percent. The day after Princeton revealed its figures, Yale’s $41.4 billion endowment, the last of the Ivies to report its numbers, posted the second lowest return among this peer group: 5.7 percent net of fees for the year ending June 30.
Princeton’s modest investment gain also fell below MPI’s expected return of 6 percent for the university, and significantly lagged the global 70/30 benchmark, which returned 14.2 percent for the fiscal year. This follows Princeton’s fiscal 2023 loss of 1.7 percent, which left it at the bottom of the Ivy League, although still faring better than MIT’s 2.9 percent loss during the same period.
Princeton’s Ivy-lagging return, however, is not entirely surprising. MPI attributes Princeton’s low returns largely to the portfolio being heavily skewed toward venture capital — an asset class that struggled during the period — while it lacked sufficient exposure to U.S. equities, particularly tech stocks, which were particularly strong in fiscal 2024. The S&P Information Technology sector, driven by major tech players, surged 41.8 percent, on top of a 40.3 percent gain the previous fiscal year.
MPI’s analysis indicates that Princeton’s endowment has a target allocation of 8 percent to emerging markets equities, slightly above the Ivy League average of 6 percent. And while EM stocks slightly outpaced foreign developed stocks in fiscal 2024, they delivered a fraction of the S&P 500’s 24.6 percent return.
MPI found that several universities, Princeton included, also accessed bond markets in fiscal 2024, facing much higher interest rates than in previous years. This borrowing trend contrasts sharply with the stimulus-driven period of low rates that fueled private market growth. Additionally, Princeton’s exposure to real estate — in line with the elite endowment average — likely weighed on returns, as Cambridge Associates’ Real Estate Index fell for the second consecutive year, down 4.2 percent.
Another challenge the university is facing is that, like with Harvard, donations are down. Princeton raised $66.7 million, the second consecutive year of declining donations. With the endowment covering roughly 70 percent of the school’s undergraduate financial aid budget, this downturn in donations could impact Princeton’s ability to sustain its aid programs at current levels.
Despite short-term setbacks, Princeton’s endowment has achieved annualized returns of 9.2 percent over the past decade and 9.9 percent over the past 20 years.
