The Oxford Endowment Fund (OEF), a £1.7bn (€2.3bn) pooled fund run on behalf of Oxford University and a number of individual colleges, has reported a 9.1% investment return for the 2014 calendar year.

This takes its annualised net return for the five years to the end of 2014 to 8.9%.

OEF’s investment objective is to achieve 5% growth in real terms per year, with lower volatility than experienced solely by investing in public equity markets.

Together with the £300m Oxford Capital Fund, which provides expendable capital over the medium term (typically for building projects), OEF is run by Oxford University Endowment Management (OUEM), a wholly owned subsidiary of the university.  

The current investment structure was established on 1 January 2009.

Global equities, which make up 52% of the portfolio compared with a 45% target allocation, returned 7.7% over 2014.

While OUEM said there had been less opportunity for growth in more mature markets, it continued to add incrementally to Japan, given the positive economic and structural changes occurring in the country.

It also considers the Japanese market to be more attractively valued than other developed markets.

At end-2014, Japanese investments made up 6% of the overall fund portfolio, while 37% of the fund was invested in North America, 27% in the UK, 16% in emerging markets and 11% in Europe.

Meanwhile, private equity was the biggest-returning asset class, with a 25.4% return for the year.

The allocation has moved from 1.9% of the portfolio at inception to 17.7% at 31 December 2014, and an average age of invested capital of less than two years.

Real assets, which include property and inflation hedges and make up 13% of the OEF portfolio, returned 9%.

Rural property has been a significant driver of performance, returning 13.8% on an annualised basis since 2009.

This was driven by strong uplifts in rural UK land valuations and specific value enhancements in individual estates.

In 2014, OUEM began implementing a direct commercial property strategy.

It said that while high valuations had been a challenge for investing, it continued to target areas of the UK market where it had a competitive advantage.

From 1 January, the real asset allocation has been split into property and inflation hedges – which include index-linked bonds, natural resource equities and commodity investments – to reflect the different investment opportunities of each asset group more accurately.

The target allocation for property has been increased to 9%.

Last month, in response to a student campaign, Oxford University announced measures to strengthen its fossil fuel investment policy but stopped short of full divestment.

However, the OEF has no direct investments in the energy sector, although an estimated 3% of the fund is exposed to the sector via pooled vehicles.

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