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Digital Subscriptions > The Hedge Fund Journal > Issue 126 - September 2017 > Endowment Style Investing Made Accessible

Endowment Style Investing Made Accessible

An exciting development that continues to evolve

The current period of low rates, unprecedented low volatility, lack of dispersion at all levels, and middling non-equity portfolio returns continues to draw investors towards considering multi-asset investment managers. Multi-asset investing generates a good deal of press, ranging from the definition to the proper implementation. For the past several years asset managers have commercially built out capability and rolled out products to meet the interest level. The offerings, historically available to large institutional investors, are now available to a wider swathe of investors in co-mingled and customized vehicles. It is this access by most levels of investors, including private investors, to the “endowment style” of investing employed by the most sophisticated investors that is getting a great deal of attention.

Multi-asset investing can trace its roots back to the balanced funds of the 1920s (some of which still exist) which first incorporated standard, liquid equities and bonds in a single fund. This mix of domestic equities and investment grade bonds in 60/40 weights has certainly stood the test of time and is still a benchmark.

Endowment style investing, of the type that Yale’s David Swensen developed and popularized, clearly paved the way for a broader adoption of multi-asset investing. As the breadth of asset and strategy choices have grown the model continues to evolve. This includes the introduction and in some cases reliance for returns upon less liquid strategies like private equity. The inclusion of these “illiquids” as compared with a balanced fund of public equities and liquid bonds has necessarily changed the liquidity profile of multi-asset investing from its beginnings. It is, however, the ability to access these hard to access and in some cases unique exposures, which is attractive.

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