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In fact, Harvard has sent the clearest signal of a renewed focus on sound risk management, with new Harvard Management Company CEO Narv Narvekar recently introducing a new risk allocation framework that places emphasis on better understanding, evaluating and dealing with portfolio risks. The aim is to boost risk-adjusted returns, which makes sense, but more on that later.

Managing risk hasn’t always been the central focus for large endowments, though. In fact, for more than half a century, endowments have been slowly moving away from an emphasis on risk management. In the late 1960s, what is now referred to as the Barker report, advocated for endowments to shift their investment objectives from sustaining income to maximizing long-term total return. Slowly, endowments began downplaying the importance of risk as they shifted toward higher-risk, higher-return strategies.