Yale University Investments Office: August 2006

More recently, the overall weight of private equity in the Investment Office portfolio has been decreasing (from a target of 25% against the most recent number of 17%) as a consequence of Yale perceiving lack of specialization of several equity funds ("positioning themselves as asset managers") and because of the indiscipline and inexperience of several new market players. Albeit, Yale has not dismissed this asset class due to the historical success, the strong relationships developed with key managers, its know-how and experience on the private equity process and not to be perceived as a market-timer type of investor.

I strongly advocate tactical asset allocation process and diversification over several different income and growth strategies. I believe that risk management and protection of investor's endowment are major objectives. In my portfolio, stocks may occupy a large portion and the

William and Flora Hewlett Foundation is a private foundation that give grants and gifts to different programs and addresses different social issues that include education, environment, philanthropy, global development and population, performance art programs, and other special projects. The foundation’s main objective is to help improve the lives of people for the betterment of the society. HF is a nonoperating foundation and relies on the “return on invested assets” to run the whole program (Viciera & Tung, 2006). With that being said, the foundation has to invest their resources to different assets and that it will help achieve the foundation’s goals.

Our team recognizes Harry’s reminder as a wise disclaimer to provide to the client. Those who are unfamiliar with the portfolio management rely on past performing capital generators and hope for the identical result. Harry is making sure that the client understands that the market is volatile and is unpredictable. With 60% of the assets allocated to equities in a small-mid cap fund, a great deal of fluctuation can take place during the accumulation period. Harry wants to ensure the portion allocated in this market is tracked carefully and ensure major losses are avoided. Harry must include a statement that assists the client in understanding how the growth in their portfolio can fluctuate. Often times, clients are blinded by short term results. Harry’s Job is to ease the emotions of the clients and act in a way that has their best interest to achieve their financial goal. With the Robinson’s goal in mind, harry must not only consider the fiduciary standards when it comes to investment advice, but build on the foundation the Robinson’s are looking to

Instead of relying solely on external management, they allocate 68% of their endowment to internal management and the remaining 32% to outside asset managers. In order to do this, HMC employed 38 investment professionals and 148 other employees whose jobs were solely to manage the $19 billion dollars in total assets, of which $15.1 billion were endowment funds. This management strategy generated expenses of around $93 million dollars per year (49 basis points), and produced a real return of 11.3%, after expenses. This method of investment costs about 19 more basis points than a passive strategy and about 51 basis points cheaper than a typical active investment strategy using 100% outside managers. Harvard University opted for this strategy because it is cheaper than a traditional active management strategy while still allowing them the ability to adjust their risks taken and expected returns in order to remain on the “efficient frontier” of what return was required to meet their internal institutional goals.

Lastly, I have become increasingly involved with Yale Undergraduate Diversified Investments, which is a student financial education club that strives to provide all members with a thorough understanding of investment analysis and valuation. Through my participation, I have attended a weekly lecture series, which has provided me insight into a wide range of financial topics, including the production and development goals of corporations.

“In investing what is comfortable is rarely profitable,” Robert Arnott, famous entrepreneur. Robert Arnott meant that you have to step out of your comfort zone and diversify our portfolio to succeed in the stock market, in other words diversification. Diversification is one of the most important strategies to use in the stock exchange, and since diversification is one of the key concepts you need to understand and utilize in today's stock exchange, you will need to learn why you use it, how I used it, and the disadvantages and the advantages of diversification.

Although the U.S. has become the world 's largest economy by making up half the world 's total global market capitalization, an investor would likely miss opportunities elsewhere by holding only domestic stocks. Spreading the portfolio across a number of countries helps investors to take advantage of a larger opportunity set, reducing the chances of losses that occur only on a single market. Although, diversification cannot guarantee profits or protect against losses, historically U. S. market returns have benefited more from emerging markets than from other developed markets. In recent years, emerging markets have become more attractive to investors due to their rising economic productivity and favorable demographics, associated with

The Case is about the decision of the Yale Investments Office whether to continue to allocate the bulk of the university 's endowment to illiquid investments--hedge funds, private equity, real estate, and so forth. Important is to consider the risks and benefits of a different asset allocation strategy. Before the choice between different subclasses, e.g., between venture capital and leveraged buyout funds would be analyzed it is advantageous to get first background information. Effective management of a university endowment requires balancing fundamentally competing objectives. On the one hand, the University requires immediate proceeds to support the current generation of scholars. On the other hand, investment managers must

My experience at Villanova, both as a research fellow and a student was formative of my fascination with investments, hedge funds, and mutual funds. My original interest sparked while working with Dr. Velthuis and performing literature reviews on effects of corporate activism on stock prices, and size effects on hedge fund returns. Since then, classes in Portfolio Theory and

Yale’s belief in equities is reflected through the endowment’s heavy allocation in equity from 1985-2010. The weight allocation, however, is heavier in the earlier years (1985-1999) than in later

Diversification is a method of investing that been shown to increase portfolio return while reducing portfolio risk as measured by standard deviation. This method specifically increases the efficient frontier for investors. The challenge to an investing firm is an appetite by its customers for an ever increasing efficient frontier. One area to explore to obtain this increase is through further diversifying through international diversification.

Blackstone Group L.P. (NYSE:BX)’s size does provide a competitive advantage that could transform to sustainable growth over a longer period of time. Larger alternative asset managers have been the recipients of a tendency to consolidate assets, which is expected to continue onward. Blackstone 's 2-and-20 fee structures on assets under management give it significant operating leverage, and allow it to support excellent margins among rapid growth. Blackstone is the leading option for many pension funds, endowments, family offices, etc. Having the “Blackstone” brand name as a leading competitive advantage.

Oana Mădălina PREDESCU Bucharest Academy of Economic Studies predescu_oana85@yahoo.com Stelian STANCU Bucharest Academy of Economic Studies stelian_stancu@yahoo.com Abstract. This paper examines both the benefits of choosing an internationally diversified portfolio and the evolution of the portfolio risk in the context of the current global financial crisis. The portfolio is comprised of three benchmark indexes from Romania, UK and USA. Study results show that on the background of a global economic climate eroded strongly by the effects of the current financial

If the assets exist to help meet a liability, the liability should be considered in the process; 3. Basing one’s decision solely on an asset allocation’s mean and variance is insufficient to base one’s decisions, in a world in which asset class returns are not normally distributed; and, 4. Most investors have multi-period objectives and the mean-variance framework is a single period model. These potential shortcomings are the likely reasons that practitioners have not fully embraced meanvariance optimization. For a number of practitioners, mean-variance optimization creates the illusion of quantitative sophistication; yet, in practice, asset allocations are developed using judgmental, ad hoc approaches. Recent advances significantly improve the quality of typical mean-variance optimizationbased asset allocations that should allow a far wider audience to realize the benefits of the Markowitz paradigm, or at least the intent of the paradigm. In this article, we focus on the first issue: the lack of diversification that can result from traditional meanvariance optimization. We begin with two examples in which traditional mean-variance optimization