Endowment ETF Insight: Harvard, MIT and Yale

The endowments of Harvard, MIT, and Yale all utilize Index ETFs as a part of their investment strategies. In reviewing their 2008 third quarter SEC filings, it was interesting to see a split in their indexing strategies.

Harvard increased its allocations to Emerging Markets, US Small Cap Stocks (IWM), and China (FXI). It decreased its allocation to Brazil (EWZ).

MIT increased its allocation to Emerging Market Stocks (EEM) and US Stocks (SPY). It cut its Developed International Stock (EFA) exposure in half.

Yale increased its allocation to Developed International Stocks and US Small Cap Stocks. It decreased its allocation to Emerging Markets Stocks.

It has been well documented that endowments are faced with capital calls for their private equity holdings and ETFs provide some of the easiest liquidity for serving those capital calls. We wonder if that's led to the sale of some of their positions.

We are also not surprised to see the reallocation of capital to Emerging Market Stocks. These markets experienced some of the most ferocious selloffs, and it looks like Harvard and MIT wanted to take advantage of these declines.

The move into US Small Cap Stocks comes as no surprise either. We believe institutions are positioning their portfolios for an economic recovery and historically US Small Cap Stocks outperform other asset classes as the economy starts to improve.

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Disclosure: The author’s firm has positions in SPY, EEM, EFA