Surprise Redux--Endowments Underperformed the 60/40 Benchmark After All
10 Pages Posted: 17 Aug 2021
Date Written: September 1, 2020
Abstract
Recently, a paper, “Surprise, Endowments Have Significantly Outperformed the 60/40 Benchmark” was written by Dr. Hossein Kazemi—a professor of finance at Isenberg School at the University of Massachusetts Amherst and a senior advisor to the CAIA Association—and jointly produced with CAIA.1 In it, Dr. Kazemi attempts to assuage any concern endowment managers and their advisors may have due to papers such as Hammond (2020a and 2020b) and Ennis (2020a and 2020b). In so doing, he provides two false hopes—first, that endowments have “significantly outperformed the 60/40 benchmark” as evidenced by their outperformance of a global 60/40 mix, and second, that alternative investments have provided endowments with additional returns. Unfortunately, relative to the average and smaller endowments, neither assertion is accurate. His conclusion that “endowment managers deserve a raise”, suggests endowments should simply continue their past practices. Nothing could be further from the truth.
Keywords: endowments, 60/40, performance, 60/40 benchmark,asset allocation, alternatives
JEL Classification: E
Suggested Citation: Suggested Citation