30th June 2021

The Oxford Endowment Fund performance and ESG reporting

We are pleased to provide an update on the Oxford Endowment Fund’s returns to 31 December 2020, alongside our ESG reporting. This is the first year that we have reported against the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, and our broader ESG analysis of the portfolio is found alongside this here: ESG and TCFD Report | OUem

The purpose of the Oxford Endowment Fund is to preserve and grow the value of our investors’ permanent endowment while providing a sustainable income stream. Its specific investment objective is to return an average of 5% per annum in real terms over the long term. The Fund’s progress against this objective is judged over time horizons suitable for the long term capital held within the Fund. To 31 December 2020, annualised over five years, ten years and since inception (on 1 January 2009), the Fund has returned 10.4% (8.7% real), 9.2% (7.4% real) and 9.7% (7.7% real) respectively. This is comfortably in excess of its investment objective of 5% real. We report our returns net of all fees and expenses.

As well as generating an investment return, every year, part of the Oxford Endowment Fund’s total return is distributed to investors to help them meet their spending obligations. Since inception, the distribution per unit has risen by 67%, against cumulative inflation of 28% over the same period. Cumulative distribution from the Fund now totals £952m, with the payment in 2020 reaching £171m, all of which goes to furthering the charitable objectives of our investors.

While the power of endowments is to make investments over time horizons beyond those available to other investors, the year end provides a natural point for reflection. In the 12 months to 31 December 2020, the Fund’s net return was 11.6%, during a year that saw some of the most dramatic falls in markets since 2008, as the world was buffeted by COVID-19. As a long term investor, we fully expect periods of dislocation and market volatility which we navigate through robust risk management. In this period of high emotions and information overload, our investment philosophy and approach enabled us to focus on investment fundamentals. As well as rigorous risk management, the Oxford Endowment Fund benefited from some of the drivers behind markets, as long term themes, anticipated to take place over the next few years, were compressed into a matter of months. The return was led by the Equity portfolio (both Public and Private), where there were particularly strong performances from managers focused on innovation and healthcare, which benefited from the acceleration of certain technologies and changing consumer habits enforced by global lockdowns.

During the year, there were no significant changes to the asset allocation, and the Oxford Endowment Fund remains predominantly invested in Equity, both Public and Private. During 2020, within Public Equity, the transition to a more concentrated portfolio continued, and we moved on from several relationships. In Private Equity, we remain highly selective when committing to the new funds of longstanding relationships and took on only a handful of new Private Equity groups. With each opportunity, we have backed experienced investors, with targeted pools of capital to invest in specific opportunities. This provides the Oxford Endowment Fund with access to differentiated equity investment ideas which simply could not be accessed in the public markets. We took advantage of the strong secondary market in 2020 as a buyer and seller. This included adding capacity to a highly sought-after group, buying fund interests in which we are already invested, as a selling LP sought liquidity. We also began the sales process of a handful of groups where we held interests in early vintages and where we can see that, from this point onwards, we will be able to deploy capital into more attractive future IRRs elsewhere. In Credit, new activity was limited to short duration investment grade credit for liquidity purposes. In Property, we have been very focused on creating value through active asset management, plus developing our theme of natural capital.

Within this environment, the team has continued to find and evaluate investments to generate returns for the Fund in years to come. We have a small, dedicated and experienced group of professionals across the business, who remained healthy and worked effectively together as a team, despite the unusual backdrop provided by 2020.