If you ask people who the most successful investors are, you'll probably get responses like Warren Buffett of Berkshire Hathaway, John Neff, formerly of Vanguard's Windsor Fund, or George Soros, the famous hedge fund manager.
However, some of the most successful investors from a risk/reward perspective are the large university endowment funds. This group includes universities with endowments larger than $1 Billion such as Yale, Harvard and Vanderbilt.
Source: 2007 NACUBO Endowment Study
What Makes the Large Endowment Funds Different?
Large Endowment Funds consistently beat the market on a risk-adjusted basis! Why? Because they heavily diversify away from traditional asset classes like stocks and bonds, and into less well-known asset classes that have the capability to deliver profits over a business cycle. In fact, the average endowment fund with over 1 billion in assets as of June 2007 had less than 59% of its assets in stocks and bonds.
Multi-Asset Diversification
Endowments invest across many different asset classes and pay as little as possible in fees and expenses. Until the recent explosion of low-cost Exchange Traded Funds (ETF's) it was almost impossible to diversify as cheaply and as broadly as the large endowment funds. Now investors can invest in the same sectors as hedge funds and endowment funds utilizing low cost ETF's. It is now possible, through Exchange Traded Funds, to invest in assets like:
Timber - Currencies - Private Equities - Venture Capital - Commodities - Absolute Return Strategies
Introducing the Gradient Endowment Series Portfolios
Based on groundbreaking research conducted at Vanderbilt University, it is now possible for the individual to invest like an endowment fund. Five diversified portfolios are available based on your personal Risk Tolerance Analysis. Each portfolio is allocated across the universe of investment vehicles in increments most suited to each individuals risk tolerance, time horizon etc. Some of the asset classes are illlustrated below.
Real Estate - Fixed Income - International Stocks - U.S. Stocks - Private Equity - Hedge Strategies - Commodities - Hard Assets
Why ETF's Make Sense Often times, ETF's allow us to take advantage of:
Lower Expense Ratios - Tax Efficiency - Diversification - Intraday Trading - Transparency
Reprinted with permission of Gradient Investment Group
Exchange Traded Fund (ETF) A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETF's experience price changes throughout the day as they are bought and sold.
ETF Definition Source: www.investopedia
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