Cornerstone, An Investment Advisory Firm

1598 WordsApr 19, 20167 Pages
CornerStone Partners CornerStone, as an investment advisory firm, has all the necessary expertise and ability to dedicate all of its resources for the sole goal of maximizing Lumina’s endowment fund returns at the desired level of risk. Lumina has limited staff, so outsourcing investment responsibility allows them to focus on their core business. CornerStone specializes in managing portfolios, so they have more knowledge and access to sophisticated investment techniques and asset classes, which small funds are deprived of. All of these factors, coupled with CornerStone’s ability to act on investment decisions quickly, allow Lumina to benefit from reduced opportunity costs. To determine if it is a good idea to outsource the portfolio management activity to CornerStone we must also look at the disadvantages. It may cost a substantial amount to buy investment services from outside firms. Value added by an investment firm must exceed costs that the company incurs. Otherwise, it would be wiser to invest directly into the market. Another downside is losing control over the investment decisions and putting the endowment in a fund that will not be as transparent, thus leading to potential problems. After drafting the IPS, CornerStone is responsible for following it; however, they still have freedom to make short-term tactical decisions that allow them to act on the opportunities and changes in the market. Also, by letting CornerStone manage the fund, Lumina won’t benefit from the

More about Cornerstone, An Investment Advisory Firm

Open Document