En-Down-Ments

Posted on Thursday, September 24, 2009

Steep investment losses have caused painful cutbacks at some of the nation's best-known universities over the most recent fiscal year and have prompted questions about whether their endowments are taking too much risk.

But as the schools, one by one, disclose their numbers, the managers of these endowments are indicating their continued support for a diversified portfolio chock full of alternative investments like hedge funds, private equity and real estate — the very things that have caused so much trouble.

This portfolio strategy is sometimes called the Swensen model, after David F. Swensen, who heads the Yale endowment. On Tuesday, Yale disclosed the details of its year, reporting an investment loss of 24.6 percent, compared with an average drop of 17.2 percent for large funds, according to the Wilshire Trust Universe Comparison Service.

Mebane Faber (of World Beta) sums it up best, by not saying much at all: