The Troves of Academe: Asset Allocation and Investment Performance of University Endowment Funds

摘要: In this paper we investigate the role of asset allocation in the performance of college and university endowment funds. Our analysis is based on a unique dataset detailing the investment practice and performance of these investors from 1984 to 2005. Despite their ability to implement relatively unrestricted investment strategies, and despite a wide heterogeneity in the asset allocation weights deployed, we find that the university endowments in our sample hold remarkably similar levels of asset allocation (or “passive”) risk. We argue that this self-imposed passive risk budget is ultimately hurting the performance of endowments that are less committed to active management. We also document that the average endowment seems to have under-utilized its active management abilities in favor of a more passively oriented portfolio.