Private equity firms yielded some of the best returns for the nation's university endowments last year, but venture capital firms did only so-so, reflecting what most people already know about 2007: It was great for private equity, but hard for venture capitalists.
At the end of the year, however, conditions began to flip, so the latest report from the National Association of College and University Business Officers (NACUBO) reporting how university endowments performed is helpful mainly as a trailing indicator.
The credit crunch is more likely to hurt companies dependent on private equity firms, and so could negatively affect private equity firm results going forward. Private equity firms invest large sums of money, often buying companies outright, and their target companies tend to be more mature, more likely to be considering going public, at a time when the stock market is getting hit. Venture capitalists are focused on very young companies.
See chart below for the full break-out (and see the full survey announcement). Private equity investments made by colleges delivered a 19.8 percent return to colleges last year, according to the NACUBO survey, compared to venture capital investments, which saw 15 percent returns. That's not bad. But of the 10 asset classes tracked, private equity was the second best performing, exceeded only by foreign stock investments, which delivered a 28.3 percent return.
Venture capital was middle of the pack, ranking fifth overall.
Some 785 institutions participated in the survey. Notably, universities have upgraded the amount of their investments to hedge funds and private equity and hedge funds, while they have increased investments in venture capital only slightly.
