tailieunhanh - The Sovereign Wealth Fund Initiative Summer 2012: On the Need to Rethink the Endowment Model…Again

Indeed, these tough times can be seen as an opportunity for the industry to reinvent itself. Perhaps, the industry has moved beyond the first phase, in which it established itself as a part and parcel of the investment matrix. The industry needs to evolve again to strengthen its position and proposition. It is probably time to question established wisdom and explore alternatives. In the present situation, there may be no single ‘silver bullet’ solution, but it will require a multitude of initiatives to be taken across the entire spectrum of activities of a mutual fund. We have attempted to take. | The Fletcher K I School TUFTS UNIVERSITY The Sovereign Wealth Fund Initiative Summer 2012 On the Need to Rethink the Endowment Patrick J. Schena Eliot Kalter1 It has it seems become de rigueur to attribute a certain legitimacy to stylized models of sovereign investment strategies. While a convenient means to conceptualize and catalog investment programs such efforts often mask the complexities which actually drive investment strategy including the allocation decisions across asset classes and maturities and the more critical matter of liability structures whether explicit or contingent. Recent commentary concerning the evolution of the so-called endowment model is a case in The crux of this comparative exercise was based originally on evidence of long-term out-performance by large endowments attributable to a propensity to investment in less liquid investments with relatively higher return structures. Certainly these investment strategies warranted and received careful examination by sovereign wealth funds SWF . While it is true that SWF s have been attracted to university endowments as models of institutional investment this interest has not been relegated exclusively to sector and class allocation especially in alternative assets but rather also extended to organizational and governance structures as they might support or enhance the investment process. However in the aftermath of the recent financial crisis and especially poor performance with a particular focus on the Harvard endowment these strategies have come under intense scrutiny. As Tony Tan formerly deputy chairman of the GIC of Singapore noted over two years ago the idea of the endowment model had become influential but inherent challenges related primarily to liquidity required all investors to rethink the efficacy of the 1 Patrick Schena PhD is Adjunct Assistant Professor at the Fletcher School. Eliot Kalter PhD is President of EM Strategies. Both are Senior Fellows and