Sunday, February 27, 2005
Barron's on Endowments HF Allocations
Barron's 2/28/05
One-Stop Shopping
Lawrence C. Strauss
Smart Moves?
U.S. educational endowments allocated on average about one-third of their portfolios to alternative assets, including hedge funds, in the 2003-2004 fiscal year, a survey shows. That was about in line with 2002 levels, and a big jump from 2000, when the dollar-weighted allocation to those strategies averaged 24%.
Those were among the findings in a recent survey conducted by the Commonfund Institute, which advises endowments on investing and also runs many internal funds of funds for those investors. The survey polled 707 endowments, including Harvard and Yale.
The endowment community was an earlier entrant to the hedge-fund world, in many cases ahead of pension funds.
In terms of alternative strategies, about half the allocations (48%) went into hedge funds, compared with 14% for private-equity funds and 11% for private equity real- estate funds. Smaller endowments tended to invest more heavily in hedge funds than larger endowments -- largely because hedge funds, their lockup periods notwithstanding, are generally more liquid than private-equity or venture-capital funds.
The most popular hedge-fund category among these endowments was multi-strategy, including funds of funds and single-manager funds that invest in several strategies.
John S. Griswold, executive director of the Commonfund Institute in Wilton, Conn., says hedge funds have "been a positive" for endowments, "but there are increasing concerns." Those include excessive expectations for hedge-fund performance. "Fifteen to 20% returns is probably unrealistic," Griswold says. "Return expectations ought to be tempered." And he cautions that endowments, especially smaller ones with fewer investment staffers, will have to pay more attention to assessing the performance and operations of hedge funds in which they've invested.
One-Stop Shopping
Lawrence C. Strauss
Smart Moves?
U.S. educational endowments allocated on average about one-third of their portfolios to alternative assets, including hedge funds, in the 2003-2004 fiscal year, a survey shows. That was about in line with 2002 levels, and a big jump from 2000, when the dollar-weighted allocation to those strategies averaged 24%.
Those were among the findings in a recent survey conducted by the Commonfund Institute, which advises endowments on investing and also runs many internal funds of funds for those investors. The survey polled 707 endowments, including Harvard and Yale.
The endowment community was an earlier entrant to the hedge-fund world, in many cases ahead of pension funds.
In terms of alternative strategies, about half the allocations (48%) went into hedge funds, compared with 14% for private-equity funds and 11% for private equity real- estate funds. Smaller endowments tended to invest more heavily in hedge funds than larger endowments -- largely because hedge funds, their lockup periods notwithstanding, are generally more liquid than private-equity or venture-capital funds.
The most popular hedge-fund category among these endowments was multi-strategy, including funds of funds and single-manager funds that invest in several strategies.
John S. Griswold, executive director of the Commonfund Institute in Wilton, Conn., says hedge funds have "been a positive" for endowments, "but there are increasing concerns." Those include excessive expectations for hedge-fund performance. "Fifteen to 20% returns is probably unrealistic," Griswold says. "Return expectations ought to be tempered." And he cautions that endowments, especially smaller ones with fewer investment staffers, will have to pay more attention to assessing the performance and operations of hedge funds in which they've invested.
# posted by Tom @ 3:51 PM 
