Elsewhere online
February 05, 2015

College Endowments Grow Bearish on Alternative Investments

Major college and university endowments are trimming their reliance on alternative assets like hedge funds and private equity, retreating from a strategy that got the financial world's attention by drawing big gains before the recession, according to Financial Times.

While the latest Commonfund survey of endowments showed a relatively minor drop in alternatives—from 61 percent of $1-billion plus funds' investments two years ago to 57 percent last year—experts suspect the ratio will continue to dip as endowment managers and university trustees increasingly look askance at the fees alternatives charge.

As stocks have rallied since the 2008 crash, the S&P 500 has outperformed big college endowments, including that of Yale University, which pioneered the alternatives-heavy strategy, but over 10 years the colleges have done better. Dialing down alternatives now suggests that "endowments, like retail investors, tend to adjust asset allocation according to the 'hot hand' and the latest results," the Financial Times writes.