U.S. college endowments are cutting holdings of alternative investments, such as private equity, as many seek to recoup record losses from four years ago.

Colleges on average allocated 47 percent of their investment portfolios to alternative assets in the 12 months ended in June, down from 54 percent the year before, according to a preliminary report from the National Association of College and University Business Officers and the Commonfund Institute.

The drop “may indicate a pause in the long-term trend of growth” in private equity, hedge funds and other alternative investments, the groups said in the report released today that reflects data from 461 U.S. colleges. A final report with data from more schools will be released in January, they said.

Harvard University and other wealthy schools redefined how endowments are invested by aggressively expanding holdings of private equity and hedge funds as well as other less liquid and more risky alternatives. Those investments backfired in the wake of the global credit crisis that peaked in 2008, resulting in record losses and leaving institutions short of cash.

Harvard is among the institutions still seeking to recover from fiscal 2009 losses. While the university in Cambridge, Massachusetts, posted an 11.3 percent investment return in the year ended in June, the value of the endowment at $32.7 billion is still well below the peak of about $37 billion set before the credit crisis.

Domestic Equities

Colleges posted an average endowment investment return of 11.7 percent in the year ended in June, after losing 0.3 percent the year prior, according to the preliminary NACUBO-Commonfund study. Domestic equities generated the biggest gains at an average of 20.5 percent while alternative strategies produced a return of 8.6 percent, the groups said.

Yale University, the world’s richest school after Harvard, in September trimmed a target for private equity investments to 31 percent of its $20.8 billion endowment from 35 percent. Harvard said in September it is “actively focused on honing” its private equity strategy as returns have trailed expectations.