Kamehameha trust earns 17%

Kamehameha Schools posted the second-largest gain among U.S. prep schools in the latest fiscal year

Kamehameha Schools, which has an endowment larger than five Ivy League institutions, rode the real estate markets to earn the second-best investment gain among the biggest U.S. prep schools in a survey.

Albuquerque Academy in New Mexico's $278 million fund had the best return, gaining 26.8 percent for the fiscal year ended June 30 as property values rose around New Mexico's largest city.

The Kamehameha Schools system, which devotes one-fourth of its $7.7 billion endowment to Hawaii real estate and is the state's biggest private landowner, had a 17 percent increase.

"We happen to be in a nice niche," Albuquerque Treasurer Richard Elkins said.

The school owns a company that is developing a planned luxury-home community in suburban Albuquerque.

The 12 biggest prep- and independent-school funds responding to a Bloomberg survey gained an average of 14.7 percent for the fiscal year. Besides real estate, non-U.S. stocks and alternative investments such as hedge and buyout funds increased returns. Schools use income from endowments for expenses including scholarships, salaries and capital improvements.

The median gain for U.S. prep schools was 12.4 percent in fiscal 2006, according to Cambridge Associates, a Boston-based endowment-consulting and research firm. The 25 largest U.S. college and university funds, tracked in a separate Bloomberg survey, advanced an average of 16.3 percent.

All 12 prep schools that supplied return information among 15 surveyed outpaced the Standard & Poor's 500 index, which rose 8.6 percent. Cranbrook Schools in Bloomfield Hills, Mich.; St. Paul's School in Concord, N.H.; and Deerfield Academy of Massachusetts each gained at least 15 percent.

The Kamehameha Schools trace their roots to a bequest by Bernice Pauahi Bishop, great-granddaughter of Chief Kamehameha I, who unified the Hawaiian Islands in 1810.

On her death in 1884, she left 375,000 acres of land to help establish schools benefiting the children of Hawaii.

Today, with 6,600 students, Kamehameha has the largest U.S. private school enrollment.

Aside from its land, the schools' investment choices are "really not much different than most other major university endowments," said Kirk Belsby, Kamehameha's vice president for endowment.

Kamehameha's energy investments gained 32.3 percent, non-U.S. stocks 26.7 percent, mainland U.S. real estate 24.3 percent and venture capital and private equity funds 22.2 percent. U.S. stock holdings rose 10.8 percent.

On Dec. 5, the schools won a federal court ruling that allows them to continue giving admissions preference to ethnic Hawaiian students.

A full panel of the 9th U.S. Circuit Court of Appeals in San Francisco ruled 8-7 to reverse an earlier decision by three judges from the same court. Eric Grant, a lawyer for an unidentified student who was denied admission, said he plans to take the case to the U.S. Supreme Court.