Endowment Investor Asset Allocation
Post on: 16 Март, 2015 No Comment
Around the web
- Research  magazines revisit of Pioneering Portfolio Management. [here]
- BlackRock on 10 myths surrounding alternative investments .
- Gene Podkaminer of Callan on risk factors  in asset allocation.
- Andre Perold of Harvard and HighVista on asset allocation .
- Keith Ambatcheer on long-termism. (pension-oriented, but relevant here, too.)
- Andrew Ang of Columbia on asset allocation .
- NEPC on private equity, here and here .
Saturday, 20 September 2014
CalPERS Hedge-quake?
CalPERS recently announced its intention to divest from hedge funds. [CNBC report ] If the investment committees that EndowmentInvestor knows are any indication, the decision is generating a great deal discussion.
Should your endowment or foundation follow suit?
There are a number of reasons to be skeptical:
- CalPERS size doesnt make them right
- Size is even a hinderance—more $$$ (which CalPERS has to put to work) dilutes alpha
- CalPERS is sometimes a contrary indicator—two CIOs we know actually contend that a kneejerk response to do the opposite of CalPERS is a good default choice
- While divesting $4 billion sounds like a lot of money, it is too small to move the needle at CalPERS
- At some level, CalPERS rationale [discussed below] isnt really news—it is the result of known issues and a relatively-slow analysis process
- Your circumstances are not CalPERS circumstances
Nonetheless, CalPERS decision does highlight some important issues:
- Fees matter crucially
- Simple investing is a virtue (and HFs are complex)
- Many hedge funds are merely mid-beta products that dont offer a great deal of diversification when its really needed
What, then, to do?
- Scrutinize your hedge funds for banal, yet expensive, mid-beta products—then cut them
- Scrutinize your all-in hedge fund costs
- A huge portion of the anticipated hedge fund alpha may disappear to fees
- Consultant costs are real
- Each layer of fees, base or carry, is real and worth counting
- Consultant, staff, and board time is a cost
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