Build Your Own Endowment Portfolio, Really

For the last couple of weeks, I've been watching a series of videos for my involvement with the Del E Webb Foundation. I think these videos get me out of going to in person presentations in Columbus in November, so time well spent! The curriculum is mostly aimed at new foundation board members. One of the videos had to do with investment management and based on some survey this was the common allocation.

This is a lot closer to what an individual might do in their portfolio versus someone like Harvard or Yale and what they have been doing for the last ten or 15 years which has far more in various illiquid pools of capital. Per the presenter of the video, alternative strategies were hedge funds and private equity. 

The "average" above can be very simply constructed and meet the idea we talk about regularly, a lot of simplicity hedged with a little complexity.

More clients own GLDM, as do I, but a lot of the accounts I subadvise came in with GLD. ACWX is not in the main portfolio but smaller accounts own it. 

While I would definitely want to sub out AGG for something else, the smaller exposure to AGG-like fixed income versus the 40% in VBAIX certainly helps. I used QSPIX for hedge fund replication which is the one bit of complexity in Portfolio 1. Someone might think the addition of merger arb and catastrophe bonds in Portfolio 2 is also complex which is fair.

I think the replications work versus VBAIX primarily because they have a "normal" weighting in plain vanilla equities, just above 60%. As I mentioned, swapping some AGG exposure matters too. 

There's no reason that a large endowment/foundation can't have a lot more allocated to public equities than they currently have, talking Harvard and Yale. If you are not familiar with NVPERS, it's the Nevada State pension system. Go check them out. It manages billions and has something like 88% in index funds, the rest in private placements. A lot of simplicity, hedged with a little complexity although hedged might be the wrong word. Either way, the overwhelming majority is allocated to simplicity. 

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