The Ivory Tower geniuses atop the country’s most respected endowments have recently received a firestorm of criticism for failing to produce outsized returns during the current bull market. But investors must accept that all investment strategies experience periods of underperformance and it’s hardly a reason for endowments to hang their heads.
Investors tend to have short memories and forget that these same endowments outperformed the stock market over the past decade with much less volatility.
Looking at the Yale Endowment investment policy’s achievements, Prateek Mehrotra, MBA, CFA®, CAIA® points out that their main goal is to “diversify across seven asset classes that all act independent of each other in different economic environments.” This leads to more stability and the ability for endowments to generate outsized returns that operate with an extremely long time horizon. Taking advantage of special situations, an ability available due to the diversified portfolio, allows them to distinguish an absolute return strategy and has been a factor in their growth by more than six fold over two decades.
To read the full article:
http://www.thinkadvisor.com/2014/07/31/why-endowment-funds-like-yales-are-doing-just-fine
