Both the Harvard & Yale endowment funds have the bulk of their holdings invested in foreign funds and companies. Considering that the managers of the Harvard & Yale school endowments are among the smartest around, should you follow them out of the U.S?
Harvard Top 10 Holdings
- I Shares MSCI Brazil (NYSEARCA:EWZ) 26.8% of portfolio
- Taiwan Semiconductor (NYSE:TSM) 5.5% of portfolio
- Pebblebrook Hotel Trust (NYSE:PEB) 4.3% of portfolio
- I Shares MSCI South Korea (NYSEARCA:EWY) 4.2% of portfolio
- Market Vectors Russia (NYSEARCA:RSX) 4.1% of portfolio
- I shares MSCI Chile (NYSEARCA:ECH) 3.2% of portfolio
- I Shares China 25 Index (NYSEARCA:FXI) 2.7% of portfolio
- America Movil (NYSE:AMX) 2.1% of portfolio
- I Path MSCI India (NYSEARCA:INP) 1.85% of portfolio
- I Shares MSCI Taiwan Index (NYSEARCA:EWT) 1.8% of portfolio
Yale Holdings (fund only holds 8 positions)
- I Shares MSCI Emerging Market Index (NYSEARCA:EEM) 73.3% of portfolio
- I Shares MSCI EAFA (Europe, Australia, and far east markets) Index (NYSEARCA:EFA) 10.1% of portfolio
- Berkshire Hathaway (NYSE:BRK.A) 6.3% of portfolio
- SPDR S&P 500 (NYSEARCA:SPY) 2.8% of portfolio
- Franklin Resources (NYSE:BEN) 2.65% of portfolio
- Approach Resources (NASDAQ:AREX) 2.2% of portfolio
- Higher One Inc (NYSE:ONE) 1.85% of portfolio
- Wolverine World Wide (NYSE:WWW) 0.9% of portfolio
The heavy weighting toward foreign markets is apparent in both portfolios. In the case of Yale, the fund chooses to put 73.3% of its funds into the EEM. This means that Yale is betting big on emerging markets. Similarly, Harvard also seems to be betting big on emerging markets. Harvard's largest holding is the Brazil ETF (EWZ) at 26.8%. The majority of Harvard's other large holdings also are emerging market plays.
Should You Follow Them Abroad
The answer depends largely on what your investment goals are. For example, if you an investor who needs to generate income than this strategy is not for you. These holdings do not have significant dividends. Similarly, if you cannot afford to take significant loses then this strategy is not for you. Foreign markets tend to be more volatile than the U.S. markets. If you are a short term investor, then this strategy is not for you. Recently, U.S. markets have been performing much better than foreign markets. Emerging markets have not been doing well of late.
If you are a long term investor who can tolerate some risk, then this strategy is for you. Ultimately, China, Brazil, Russia, Korea, and other emerging economies will be the growth leaders going forward. However, there likely remains many challenges ahead that will test the resolve of committed long term investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.