Steep investment losses have caused painful cutbacks at some of the US’s best-known universities over the most recent fiscal year and have prompted questions about whether their endowments are taking too much risk.

But as the schools, one by one, disclose their numbers, the managers of these endowments are indicating their continued support for a diversified portfolio chock full of alternative investments like hedge funds, private equity and real estate — the very things that have caused so much trouble.

This portfolio strategy is sometimes called the Swensen model, after David F Swensen, who heads the Yale endowment. On Tuesday, Yale disclosed the details of its year, reporting an investment loss of 24.6 per cent, compared with an average drop of 17.2 per cent for large funds, according to the Wilshire Trust Universe Comparison Service.

The fiscal year for all major university endowments ended on June 30. Preferring to emphasize their long-term results, the chiefs of many big endowments, including Harvard, Yale and MIT, have indicated they are sticking with their models. Notably, Swensen did not lay out Yale’s asset allocation for the coming year in his statement — something he has done in years past.

Yale pointed out that even after its latest loss, it has produced an average annualised gain of 11.8 per cent over the last 10 years. According to Wilshire, the average return during that period was 4.3 per cent for endowments with more than $1 billion in assets. “Just how unhappy fiduciaries are with the returns last year depends on whether they are focusing on one-year returns or 10-year returns,” said one endowment head who did not want to be quoted by name speaking about investment strategy. A number of institutions will be looking for ways to avoid some of last year’s biggest headaches, like not having enough cash on hand to meet capital calls, as required under their contracts with private equity and similar funds. Harvard, which was down 27.3 per cent last year, has acknowledged it suffered a cash squeeze and has since raised its portion in cash, among other measures.

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