- Washington University said its fund returned 37.3% in the year ended June, lifting assets under management above $19 billion. An early $50 million investment in SpaceX, made with Vy Capital before current investment chief Scott Wilson arrived in 2017, plus later exposure through other managers, added more than $2 billion in value.
- Initial public offerings accounted for roughly half of the fund total returns for the period. SpaceX sold stock publicly for the first time this year and Cerebras Systems also listed, with Wilson saying venture and growth equity performed well across the board.
- The gap to peers is stark. The median return before fees for large endowment funds was 18.9% for the same period, according to Wilshire Trust Universe Comparison Service. The University of North Carolina returned 37.8% aided by an early SpaceX stake through a venture fund, while the University of Pennsylvania returned 27.4% and declined to explain why.
- Taxes on realised endowment investment gains have risen sharply. Harvard and Yale now face an 8% rate against 1.4% previously, while a group including Washington University, Duke and Brown faces 4%.
What Happened?
Wilson said the fund has planted many seeds over the past nine years and hopes some will have an outsized effect on the portfolio. Commodities and emerging and frontier market investments also performed well. Harvard and Vanderbilt are among other schools that have gained from SpaceX positions.
Why It Matters?
Half the return came from companies going public, which is a liquidity event rather than a change in investment performance. The underlying positions appreciated over years and were carried at manager marks; listing converted those marks into observable prices and crystallised the gain into a single reporting period. That has two consequences worth stating. The result is not repeatable unless more portfolio companies list next year, so the comparison in twelve months will be difficult. And it means the reported 37.3% reflects timing of recognition as much as skill, which matters when families and institutions benchmark themselves against these headline numbers. The dispersion tells the real story. Washington University at 37.3%, UNC at 37.8% and a median of 18.9% is not a spread explained by allocation discipline, it is explained by whether an institution happened to hold SpaceX. A $50 million position returning more than $2 billion is roughly forty times invested capital, and one decision made before the current manager arrived accounts for the outperformance. Anyone studying the endowment model should read this as evidence about concentration and luck rather than about process. The tax change is the item with the most direct application for private wealth. Moving realised gains from 1.4% to 4% or 8% creates a meaningful cost to selling, which incentivises holding appreciated positions rather than trimming them. That produces a lock-in effect that raises concentration risk at exactly the point when these holdings are largest and most appreciated, and it is the same dynamic that affects any taxable holder sitting on a position that has run.
What Next?
Watch whether these endowments trim their SpaceX and Cerebras positions now that both are liquid, since the answer will show whether the new tax rates are already changing behaviour. Next year returns are the real test, as a portfolio without a listing event has to generate performance from the remaining private book. Track the pipeline of private holdings approaching public markets across the large endowments, because that is what determines whether this cohort repeats. For family offices the practical question is whether to pursue venture and growth exposure on the basis of these numbers, and the honest answer is that the median endowment returned 18.9%, which is the outcome without a SpaceX. Also watch for policy movement on the endowment tax, since the increase is recent and several affected institutions have the resources to contest it.
Affected Tickers and Coins: SPCX, CBRS
Source: Bloomberg
