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University Endowments - The Evolution of Asset Allocation

University Endowments - Top 10 Investment Research Papers

The investment objectives of university endowments differ from those of many institutional investors. Although endowments need to produce sufficient income each year to meet the needs of the institution, their time horizon is essentially infinite.

This ability to focus on a truly long-term strategy has enabled endowments to lead the way in a variety of areas, including making allocations to less-liquid asset classes. Below, we highlight some of the top, recent research papers of interest to those managing assets on behalf of endowments, foundations and other non-profits.

Savvy Investor

The Evolution of Asset Classes: Lessons from University Endowments (IMCA)
Originally published in the Journal of Investment Consulting, this 12-page report surveys asset allocation policies for larger U.S. university endowments.

Understanding and measuring the illiquidity risk premium (Willis Towers Watson, 2016)
Endowment asset managers are perhaps uniquely well-placed to take advantage of the illiquidity risk premium. In this paper, Willis Towers Watson examines the dimensions of the illiquid risk premium, and how best to exploit it.

Can College and University Endowments Do More? (Cambridge Associates, 2017)
Cambridge Associates examines whether endowments may be able to do more to support enterprise and thus lower the cost of student attendance.

Long-Term Investing - Portfolio Guide (FCLT, 2015)
This award-winning paper - a collaboration between some of the world's top funds - examines the key actions to be taken by institutional investors wanting to follow a truly long-term investment approach.

Endowment CIOs: The 100+ Top Guns (Charles Skorina, 2017)
Charles Skorina looks at the five-year performance of the world's best CIOs. The paper is split into: Top 100+ CIOs; Allocations, Skill, and Destiny; Outsourced CIOs hold their own; Charts on Performance, Portfolios, Rankings, and Returns.

Global Investment Management Fees: New Savings, New Challenges (bfinance, 2017)
New bfinance data reveals falling fees in several sectors, especially where providers have been under pressure from cheaper competitors, or where the investment landscape has evolved.

Are 5% distributions an achievable hurdle for foundations? (Russell Investments)
Russell Investments finds that sustainably supporting a 5% spending rate is a challenge in a low-return market environment. They consider the possibility that spending 5%, while maintaining purchasing power, may not be realistic.

Unleashing the Potential of US Foundation Endowments (USSIF)
This paper presents extensive data on the current state and range of foundation involvement in SRI. The paper also profiles some of the foundations that have gained meaningful ESG outcomes from their approaches to SRI.

Endowments: Are Your Reserves Long-Term Capital? (Cambridge Associates)
Cambridge Associates explores the process for deciding upon the right level of reserves, examines the policies that should be considered for reserve management, and shares the results of Cambridge's own modelling.

Norway vs Yale vs Canada: Investment Models for the Long Term (2015)
BNY Mellon asks, what's the best way for long-term investor to deploy their capital? The authors address manager selection, the growing trend in private equity, and harvesting factor-based risk premia across private and public markets.

Risk Management for Non-Profits (Oliver Wyman, 2016)
Oliver Wyman, in this paper, adapts risk practices from the private sector to nonprofits, a move encouraged by recent failures and a concern that nonprofits were starting to face increasing numbers of risk.

Defending the 'Endowment Model' (JP Morgan, 2012)
This 20 page report from JP Morgan examines the so-called "endowment model", which involves a high allocation to alternatives. In particular, this report focuses on liquidity issues that may arise in a time of crisis.

Duty, opportunity, mastery: Investment committee best practices (Vanguard, 2017)
Investment committees carry weighty responsibilities. This paper by Vanguard offers insights into how committees can improve decision-making on behalf of their organizations.

The Impact of Endowment Shocks on Payouts (2016)
The authors explore panel data on the payout behavior of over 700 universities from 1987 to 2009, and find that payouts are affected symmetrically by positive and negative shocks.

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