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A new approach to setting Endowment and Foundation investment strategy

11 February 2019

How to incorporate objective risk measures into the determination of portfolio strategies

The current success paradigm for endowments and foundations (E&F) is largely one based on delivery of relatively better performance than comparable institutions. Where an E&F portfolio lies within published performance league tables becomes the sine qua non of determining success or failure. The result is an observable clustering around a typical asset allocation, akin to that described as the Yale Model.

Yet is this portfolio strategy appropriate across all E&F? Where does "risk" factor into the success paradigm, and how to we determine "risk"?

In this paper we propose a methodology for the incorporation of objective risk measures into the determination of E&F portfolio strategies. Through leveraging advances in technology and risk modeling, we can incorporate the unique characteristics of an E&F into the asset allocation paradigm. Thus, in addition to considerations of performance, the risk to delivery on the sponsoring organization’s unique objectives can be properly considered. To read the whole paper, please click here.

 

 

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