Investment Beliefs of Endowments

55 Pages Posted: 19 Sep 2013 Last revised: 3 Apr 2014

See all articles by Andrew Ang

Andrew Ang

BlackRock, Inc

Andres Ayala, Inc.

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2014


American university and college endowments now hold close to one-third of their portfolios in private equity and hedge funds. We estimate the implied beliefs of endowments about alternative assets' returns relative to equities and bonds. At the end of 2012, the typical endowment believes that its private equity investments will outperform a portfolio of conventional assets by 3.9% per year and that hedge funds will outperform by 0.7% per year. Out-performance beliefs, particularly for private equity, have increased since 2006. There are significant cross-sectional differences in beliefs and trends: private universities are, on average, less risk averse and have more optimistic beliefs and universities with larger endowments, higher spending rates, and those that rely more on the endowment to meet operational budgets tend to believe that alternatives deliver higher alphas. Taking into account the implied equity exposures in alternative asset positions, the effective equity holding of endowments is approximately 60%.

Keywords: Hedge funds, private equity, alternative assets, portfolio choice

JEL Classification: G11, G14, G23

Suggested Citation

Ang, Andrew and Ayala, Andres and Goetzmann, William N., Investment Beliefs of Endowments (April 1, 2014). Columbia Business School Research Paper No. 13-72, Available at SSRN: or

Andrew Ang

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Andres Ayala (Contact Author), Inc. ( email )

Seattle, WA 98144
United States

William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

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New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)


National Bureau of Economic Research (NBER)

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