Seventy-Five Years of Investing for Future Generations

Financial Analysts Journal, 2020, 76(4): 5–21

35 Pages Posted: 2 Oct 2020 Last revised: 11 Nov 2020

See all articles by David Chambers

David Chambers

University of Cambridge - Judge Business School; CEPR

Elroy Dimson

University of Cambridge - Judge Business School; European Corporate Governance Institute (ECGI)

Charikleia Kaffe

University of Cambridge - Judge Business School

Date Written: September 16, 2020

Abstract

University endowments invest for future generations, so their strategy should reflect their long horizon. We researched whether they really do behave like long-term investors. We examined the behavior of US endowments since 1945 and drew comparisons with earlier periods. Using a long-run data set on 12 major universities, we examined their preferences for risky assets and documented their big strategic moves into equities and, later, into alternatives. We then analysed how they invest at the time of crises and the extent to which they exploit their long-horizon advantage. We found that, on average, endowments invested counter-cyclically at crisis times, particularly by increasing their allocations to risky assets after a crisis.

Keywords: Endowments and Foundations, Long Horizon Investing, Herding, Counter-Cyclical Investing, Asset Allocation

JEL Classification: G11, L3, G01, N22

Suggested Citation

Chambers, David and Dimson, Elroy and Kaffe, Charikleia, Seventy-Five Years of Investing for Future Generations (September 16, 2020). Financial Analysts Journal, 2020, 76(4): 5–21, Available at SSRN: https://ssrn.com/abstract=3694139 or http://dx.doi.org/10.2139/ssrn.3694139

David Chambers (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)

CEPR ( email )

London
United Kingdom

Elroy Dimson

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 700 607 7390 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Charikleia Kaffe

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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