It is generally known that endowments invest in risky assets, but quantifying such risks has remained challenging due to a lack of information about returns. We set out to address this challenge and developed a new basis for estimating endowment risks.
In stark contrast to FY 2016, this past year was a strong one for most endowments. In fact, nearly all the Ivy League endowments, Harvard being the only exception, beat the 60-40 portfolio, a commonly cited benchmark that endowments measure their performance against.
The returns of endowments can be attributed to two fundamental components: asset allocation and security selection. Asset allocation is what a factor model is generally able to explain, shown in terms of factor exposures.
Morningstar’s 2017 Target Date Landscape Report indicates that approximately one quarter of TDF series shifted the target equity allocation of at least one vintage by 15% or more over the last 5 years and nearly half by at least 5%.
Four of the other five fund families with holdings vs. returns-based discrepancies are of a similar nature in that they have investments in derivatives, leveraged funds or absolute return funds, which affect the holdings tally. In each of these cases, DSA provides a much closer estimate to the intended systematic exposure.
We demonstrate the advantages of using returns-based analysis in determining the effective glide-paths of Target-Date Funds vs. the stated ones
This white paper looks at the period of the increased volatility in the financial markets leading up to and on November 8th and provides valuable insights into internal workings of risk parity strategies during periods of heightened volatility.
We look at the largest endowments and find striking similarities in their asset class exposures. At the same time, some endowments stand out both in terms of allocations and FY2016 performance.
Using Standard Life Global Absolute Return Fund (SLI GARS) weekly performance data, we show how sophisticated factor analysis can provide valuable insights into this fund’s complex global “go anywhere” investment strategy.
An 1873 meeting that brought Harvard, Yale and Princeton together to codify the rules of American football also debuted a sports conference later known as the “Ivy League — eight elite institutions whose heritage, dating from pre-Revolutionary times, became formative influences shaping American character and culture. These schools also pioneered endowment investment management, thus helping to secure the nation’s educational legacy for posterity.