Pragmatic Observer

An Endowment Portfolio From Publicly-Traded Vehicles

I've been fascinated by work in this area for the past couple of years and have spent a lot of time researching some of the same investment vehicles listed in your article and applying them to the latest (2006) Yale Endowment model. However, I have found that many of the mutual funds available have very high expenses and relatively low returns during many market cycles.
HSGFX +.13% YTD 1.14% Exp Ratio
TFSMX +5.3% YTD 2.49% Exp
JAMNX +3.2% YTD 1.95% Exp
ARBFX +3.9% YTD 1.95% Exp
DIAMX +1.0% YTD 1.51% Exp

Yes, they do indeed offer diversification, but at what price, and for what kind of return, over the long haul? A couple of ideas to add to your research.

You have the US, Foreign, REIT and Commodities covered. The Absolute Return and Private Equity are the problems for the average investor trying to replicate the Yale Endowment. Here are a couple of things I've considered.

1) In the Private Equity area, consider holding such stocks as Brookfield Asset Management (BAM: plus 33% vs plus 7% for the S + P 500 YTD), Leukadia (LUK: plus 20% YTD ) and Macquarie Infrastructure (MIC; plus 24% YTD) among others, as well as Berkshire Hathaway B shares. Now granted, all are publicly traded but all are asset management firms which allow for managing assets beyond the realm of publicly traded companies and shares. If you look at their investment approaches they are not unlike endowments and hedge funds, and even merger and acquisition firms...with much better returns and much lower expense ratios.

2) Could you do an asset allocation, using your proposed funds, using the most recent Yale Endowment allocations, and back test it for five or ten years. This would be fascinating to see how it stacks up.

Keep up the great work. Looking forward to more on this subject.
Paul