An Endowment-Fund Fund

I stumbled across this a few days ago, maybe the hat tip should go to Charles Kirk but I am not sure, about a new fund of some sort that will "emulate the investment principles of U.S. 'super endowments' " which includes Harvard and Yale.

The company bringing this is a fund of funds company called Gottex Fund Management based in Switzerland but with offices in the US.

There was a press release on the Gottex site that says the fund was launched last week. The product will target 60-65% for alternative assets because the team running the fund "determined that a 65% exposure to alternative investments combined with traditional investments did the best in the long term."

I was not able to glean how the fund will emulate what Harvard, Yale or anyone else is doing. There was no indication that they would be privy to what any of the "super endowments" are doing. That is not to say that these people don't know what they are doing - the result may be just as good or better - I'm just saying that part is not spelled out.

It appears this will not be a listed product as it is coming from a fund of funds shop, but the idea is very interesting. I don't know how many posts and articles I have written over the years about investing, or not, along these lines. The notion of building your own endowment fund has become progressively easier to do (not to say it is right for everyone, just saying it is more accessible) in the last couple of years.

One thing that stuck out from the article was their determination that 60-65% is the right mix for alternative assets. As I have mentioned many times on this site, the US stock market is getting close to ten years with no gains. Ten years is a long time. This decade-long round trip to nowhere we are in is going to skew a lot of studies in the future about how to allocate your assets. The process undertaken by Gottex was not disclosed, so I have no idea whether their research has a skew or not, but there will be future studies done on this that will skew because of the poor equity returns of late.

This future research will argue for very little equity exposure. Very little equity exposure will be a bad idea unless global stock markets are permanently broken which is not a bet I am willing to make.

On a related note I believe the 2008 results from Harvard and Yale will be out soon. I will write about them whenever they report.